Lately, the acronym ERP has been appearing regularly in journals, HR publications, seminars and the business press. As an HR practitioner you should understand what an ERP is and what it can do for you, your career, and your firm.
ERP stands for Enterprise Resource Planning (it really should be ERPS, with an added S for System.) ERPs are normally found in big organizations, as the word enterprise, rather than company, indicates. Resources, within the context of the system, are enterprise-wide. (Resources are all the financial assets, people, production, distribution equipment and facilities plus all the functions involved in the business.) Planning refers to the ability of users to perform analyses. In other words, the system’s function is not just to provide the user with statistics about how much inventory exists or to calculate the number of back orders, employees and their skills. An ERP offers simulations and analyses to create what-if situations.
The ERP market is dominated by several large players including PeopleSoft, Baan, SAP, J.D. Edwards and several others which are upgrading and enhancing product suites to move into the lower end of the market.
To give you some idea of the size of company at which ERPs are targeted, Infinium’s 1998 corporate report states that it “specializes in providing financial management, human resources, materials management and process manufacturing applications and services to mid-sized companies,” where mid-sized is defined as “companies and divisions of larger organizations in the $100-million to the low-billions range.” Infinium is one of the smaller players with 1997 revenues of $87 million. SAP and PeopleSoft have annual revenues in the low billions.
In general, ERPs are made up of four major suites that are themselves made up of several applications.
Financialsuite
The financial suite usually includes:
•a general ledger;
•payables;
•receivables;
•fixed-asset accounting;
•currency management;
•global taxation; and
•project management.
Materials management suite
The materials management suite includes:
•purchasing;
•inventory control;
•order processing/invoicing; and
•customer service.
Human resources suite
The HR suite includes:
•basic employee information;
•payroll;
•benefits administration;
•training administration;
•recruiting and applicant tracking;
•occupational health and safety; and
•time and attendance entitlements.
Process manufacturing suite
The process manufacturing suite can include:
•manufacturing control;
•planning;
•formula management;
•regulating management; and
•laboratory management.
Most ERPs are Web-enabled, providing employee-level access to portions of the system via the Internet and the company intranet. For HR, this often means employees can access the system through a kiosk or their PC. Through these devices they can access data such as basic demographics, benefits and educational programs; they can register for training sessions, confirm their overtime status and even schedule their next vacation. Employees can maintain some of their own demographic data, make changes or requests to their flexible benefit program and perform other basic updates to the database.
In an ERP, all the application modules are integrated where possible so that data flows through the system, automatically updates the appropriate databases and is available for analysis.
For the most part, this is accomplished through the use of common nomenclature (table structures) that is often defined by the system itself. This feature has prompted one of the main complaints that users have had with these systems; they complain that the system often forces the user to change the way processes are described and handled.
Users who are responsible for entering data, whether in a retail location, in the purchasing department, on the order entry desk or in the HR department have to learn new ways of doing their jobs. And if they make errors (for instance, if they incorrectly code a field or omit some data that had not previously been required) these errors flow through the ERP and can result in major problems.
For example, improperly entered customer order information can result in invalid back orders, incorrect inventory being ordered, incorrect products being manufactured and insufficient goods available for sale — not to mention incorrect financial data. Other problems arise when one module is customized and the effects of the changes are not traced fully through other integrated modules, resulting in errors far removed from their source.
User training
Extensive user training is critical. It is estimated that the total cost of an ERP (which can be in the tens of millions of dollars) is generally a 50/50 split between the cost of the actual system itself (hardware and software) and the soft costs of training and installation. Many large ERPs are not installed by the ERP developer, but by third-party consultants who have specialized design, training and installation teams.
That said, multi-billion dollar, multi-national corporations have found that the ERP has become a critical tool to help them control their global enterprise. Think of the issues that need to be addressed by senior managers in a multi-national organization:
•there are financial problems related to currency exchange rates;
•legal issues related to multi-country health;
•safety concerns;
•environmental regulations;
•union agreements;
•scheduling problems related to the movement of goods between plants and across borders; and
•in the HR area, the identification of key, upcoming staff members (succession planning);
•training programs;
•staff transfers;
•the consistency of salaries; and
•performance review issues.
And there are, of course, language issues, tax implications and the development of intra- and inter-country financial statements. All of this information can be tracked and analysed through the ERP.
A senior HR manager — regardless of where she is living or in which branch location she works — who is looking for a specific type of engineer, must be able to access an enterprise-wide database that provides information from many plants in many different countries. The information must be based on a consistent set of criteria and available through a fairly simple user query. The result of the query could be someone already employed by the corporation or a recent applicant. An ERP can be used to help get the right applicant with the right skills, even when he works halfway around the world.
Stand-alone ERP modules
Several ERP providers have recently begun to offer standalone modules, in which certain major components are separated from the overall ERP.
These applications have “hooks” that allow them to connect with other ERP applications as they are added to the system (HR to payroll, for example).
This type of system can reduce the time needed to install applications from years down to months; it can help to reduce the cost (to, for example, six figures from seven) and it is designed to be more affordable by relatively smaller companies (those with $50-million or so in revenue). These modules are often sold by third-party consulting firms which provide the installation teams required.
In general, ERPs are sophisticated systems (in terms of the software and the hardware) for moderately large or very large organizations.
Their acquisition and implementation require a significant, long-term financial and time commitment at every level of the organization and their proper use affects everyone in the enterprise.
But if you work in a large national or global organization doing business across many sectors (manufacturing, retailer, education), an ERP can bring all the diverse pieces together at the corporate level, with the added bonus of making the system accessible by people in the firm’s remote branch offices.
Gerson Safran provides marketing and sales support to HR Systems Strategies Inc., the developers of INFO:HR HRMS. He can be reached at (519) 672-5984 or [email protected].
ERP stands for Enterprise Resource Planning (it really should be ERPS, with an added S for System.) ERPs are normally found in big organizations, as the word enterprise, rather than company, indicates. Resources, within the context of the system, are enterprise-wide. (Resources are all the financial assets, people, production, distribution equipment and facilities plus all the functions involved in the business.) Planning refers to the ability of users to perform analyses. In other words, the system’s function is not just to provide the user with statistics about how much inventory exists or to calculate the number of back orders, employees and their skills. An ERP offers simulations and analyses to create what-if situations.
The ERP market is dominated by several large players including PeopleSoft, Baan, SAP, J.D. Edwards and several others which are upgrading and enhancing product suites to move into the lower end of the market.
To give you some idea of the size of company at which ERPs are targeted, Infinium’s 1998 corporate report states that it “specializes in providing financial management, human resources, materials management and process manufacturing applications and services to mid-sized companies,” where mid-sized is defined as “companies and divisions of larger organizations in the $100-million to the low-billions range.” Infinium is one of the smaller players with 1997 revenues of $87 million. SAP and PeopleSoft have annual revenues in the low billions.
In general, ERPs are made up of four major suites that are themselves made up of several applications.
Financialsuite
The financial suite usually includes:
•a general ledger;
•payables;
•receivables;
•fixed-asset accounting;
•currency management;
•global taxation; and
•project management.
Materials management suite
The materials management suite includes:
•purchasing;
•inventory control;
•order processing/invoicing; and
•customer service.
Human resources suite
The HR suite includes:
•basic employee information;
•payroll;
•benefits administration;
•training administration;
•recruiting and applicant tracking;
•occupational health and safety; and
•time and attendance entitlements.
Process manufacturing suite
The process manufacturing suite can include:
•manufacturing control;
•planning;
•formula management;
•regulating management; and
•laboratory management.
Most ERPs are Web-enabled, providing employee-level access to portions of the system via the Internet and the company intranet. For HR, this often means employees can access the system through a kiosk or their PC. Through these devices they can access data such as basic demographics, benefits and educational programs; they can register for training sessions, confirm their overtime status and even schedule their next vacation. Employees can maintain some of their own demographic data, make changes or requests to their flexible benefit program and perform other basic updates to the database.
In an ERP, all the application modules are integrated where possible so that data flows through the system, automatically updates the appropriate databases and is available for analysis.
For the most part, this is accomplished through the use of common nomenclature (table structures) that is often defined by the system itself. This feature has prompted one of the main complaints that users have had with these systems; they complain that the system often forces the user to change the way processes are described and handled.
Users who are responsible for entering data, whether in a retail location, in the purchasing department, on the order entry desk or in the HR department have to learn new ways of doing their jobs. And if they make errors (for instance, if they incorrectly code a field or omit some data that had not previously been required) these errors flow through the ERP and can result in major problems.
For example, improperly entered customer order information can result in invalid back orders, incorrect inventory being ordered, incorrect products being manufactured and insufficient goods available for sale — not to mention incorrect financial data. Other problems arise when one module is customized and the effects of the changes are not traced fully through other integrated modules, resulting in errors far removed from their source.
User training
Extensive user training is critical. It is estimated that the total cost of an ERP (which can be in the tens of millions of dollars) is generally a 50/50 split between the cost of the actual system itself (hardware and software) and the soft costs of training and installation. Many large ERPs are not installed by the ERP developer, but by third-party consultants who have specialized design, training and installation teams.
That said, multi-billion dollar, multi-national corporations have found that the ERP has become a critical tool to help them control their global enterprise. Think of the issues that need to be addressed by senior managers in a multi-national organization:
•there are financial problems related to currency exchange rates;
•legal issues related to multi-country health;
•safety concerns;
•environmental regulations;
•union agreements;
•scheduling problems related to the movement of goods between plants and across borders; and
•in the HR area, the identification of key, upcoming staff members (succession planning);
•training programs;
•staff transfers;
•the consistency of salaries; and
•performance review issues.
And there are, of course, language issues, tax implications and the development of intra- and inter-country financial statements. All of this information can be tracked and analysed through the ERP.
A senior HR manager — regardless of where she is living or in which branch location she works — who is looking for a specific type of engineer, must be able to access an enterprise-wide database that provides information from many plants in many different countries. The information must be based on a consistent set of criteria and available through a fairly simple user query. The result of the query could be someone already employed by the corporation or a recent applicant. An ERP can be used to help get the right applicant with the right skills, even when he works halfway around the world.
Stand-alone ERP modules
Several ERP providers have recently begun to offer standalone modules, in which certain major components are separated from the overall ERP.
These applications have “hooks” that allow them to connect with other ERP applications as they are added to the system (HR to payroll, for example).
This type of system can reduce the time needed to install applications from years down to months; it can help to reduce the cost (to, for example, six figures from seven) and it is designed to be more affordable by relatively smaller companies (those with $50-million or so in revenue). These modules are often sold by third-party consulting firms which provide the installation teams required.
In general, ERPs are sophisticated systems (in terms of the software and the hardware) for moderately large or very large organizations.
Their acquisition and implementation require a significant, long-term financial and time commitment at every level of the organization and their proper use affects everyone in the enterprise.
But if you work in a large national or global organization doing business across many sectors (manufacturing, retailer, education), an ERP can bring all the diverse pieces together at the corporate level, with the added bonus of making the system accessible by people in the firm’s remote branch offices.
Gerson Safran provides marketing and sales support to HR Systems Strategies Inc., the developers of INFO:HR HRMS. He can be reached at (519) 672-5984 or [email protected].
