Introduction

Enterprise Resource Planning (ERP) systems integrate:

• Systems, an ERP system integrates all of an enterprise’s systems into one system

• Ideas from thought leaders and ideas from the thousands of enterprises that are the system vendors’ customers

• Information Technology (IT) innovations such as the Internet, e-commerce, e-procurement, data warehouses, database management systems, operating systems and networks

Collectively the systems, ideas, and IT innovations are the best practices that are integrated into ERP systems. The vision of best practices starts with senior managers, managers and knowledge workers awareness of the systems and best practices that are integrated into ERP systems.

Enterprise Resource Planning Systems

ERP systems are the end result of 30+ years experience of using systems to plan and manage an enterprise’s resources. ERP systems represent the latest stage of evolution that began with the materials management software.

Resource	System Integrated into ERP Systems
Materials	Materials Requirement Planning, Inventory Management and Financial
Plant and Equipment (capacity)	Closed Loop Planning and Manufacturing Work Orders
Human	Human Resource, Benefits and Payroll
Service	Projects/Work Orders
Products	Product Data Management and Customer Relationship Management
Strategic Resources	Strategic Planning System

From planning and managing materials, to planning and managing all of an enterprise’s resources was achieved by integrating enough systems to satisfy the requirements of a Supply Chain Planning System. The process of supply chain planning can be defined as planning the enterprise’s resources, i.e., materials, capacity and human, required to fulfill customer demand. However, the Supply Chain System doesn’t satisfy requirements for the strategic planning of an enterprise’s resources. For example, a decision to increase capacity by building a new plant cannot be made using the Supply Chain Planning System, or a decision to add new positions to the headcount cannot be made using the Supply Chain Planning System. Thus, some ERP systems integrate the second enterprise resource planning system ¾ the Strategic Planning System.

Both the Strategic Planning System and Supply Chain Planning System are enterprise resource planning systems. That is they are systems that are designed to plan and manage all of an enterprise’s resources. Strategic Planning System satisfies information requirements for the strategic planning of resources. The Supply Chain Planning System satisfies information requirement for the tactical planning of resources. Tactical planning of the supply chain is required because of constantly changing customer demand. As many supply chain planners have learned the difference between strategically planned demand and actual demand can be significant.

The Too Many Systems Problem

Ever attend a budget review meeting in which all managers had information from their own budget system, but none of the manager’s budget information was consistent with the financial system’s budget information? Are sales orders being processed by customers using the E-commerce system, by sales representatives using the customer relationship management system, and by customer service using the order processing system? Both of these situations are symptoms of the "too many systems" problem.

Symptoms of the too many systems problem include:

• Inconsistent information ¾ how can budget management decisions be made if manager’s budget information is inconsistent with financial systems budget information? Reconciling inconsistent information is inefficient.

• Inefficient transaction processing ¾ any time a transaction is process more than once transaction processing is inefficient.

• Increased system costs ¾ the cost of developing and maintaining system interfaces increases with the number of systems

An enterprise can solve all of the above problems by solving the root cause problem ¾ the enterprise has too many systems.

How ERP Systems Solve the Too Many Systems Problem

Enterprise Resource Planning (ERP) solve the too many systems problem by integrating multiple systems into one system. For example, if an enterprise has the following 7 systems:

1. Budgeting system

2. E-commerce system that enables web order processing

3. Customer relationship management that integrates lead tracking, territory management, proposals and order processing

4. Distribution system that integrates order processing and inventory management

5. Manufacturing system that integrates demand forecasting, materials requirements planning and purchasing

6. Financial system that integrates accounts receivable, accounts payable, fixed assets, general ledger and financial reporting

7. Human resource system that integrates human resource management, benefits and payroll

The enterprise could solve the "too many systems" problem by finding an ERP system that integrates the 7 systems. When implemented, there would be only one system ¾ the ERP system, and:

• Information would be consistent

• Transaction processing would be efficient

• Costs of system interfaces would be zero, as the requirement for developing and maintaining interfaces was eliminated

In order to realize the above benefits an enterprise has to select and implement an ERP system that integrates all of an enterprise’s required systems.

Defining Required Systems

In the example, the 7 systems are the enterprise’s required systems. Compiling a list of an enterprise’s required systems is the first step to solving the too many systems problem. The list of required systems is compared against the systems integrated into ERP systems in order to identify ERP systems that integrate the required systems. Information on satisfying the required systems can be used to:

• Be certain that it is possible to select an ERP system that integrates all, or at least most, of the required systems

• Make the business case for investing in an ERP system

• Identify a short list of ERP systems to be evaluated in more detail

Systems Integrated into the Top 50 ERP Systems can be used as a checklist for defining an enterprise’s required systems. Since the list is compiled from ERP systems, it may not be a comprehensive list of a given enterprise’s required systems. It is however, a comprehensive list of the systems integrated into the Top 50 ERP systems.

The system naming conventions used in Systems Integrated into the Top 50 ERP Systems are based on the most common name for a system, but not every vendor uses the most common name. For example, Strategic Planning System is named Strategic Enterprise Management by some vendors.

The six decision support systems and four transaction processing systems are named for a process flow. Process flows are used because:

• System integration is achieved by designing systems from the start to the end of a process flow. For example, the proposals ® general ledger system integrates proposals, customers’ contracts/orders, billing, accounts receivable and the general ledger

• Decisions are improved by using decision support systems that are designed from the start to the end of a process flow. For example, the front-end ® back-end supply chain system can be used to improve decisions for planning and managing the resources required to fulfill customer demand.

• Transaction efficiency is achieved by using transaction processing systems that are designed from the start to the end of a process flow. For example, the proposals ® general ledger system eliminates redundant processing of customers’ orders.

Some vendors use the term work flow systems instead of process flow systems.

The systems integrated into the process flow systems can be easily mapped to business unit systems (some vendors use the names functional systems, and best-of-breed systems for business unit systems) as illustrated below:

 

System	Process Flow System	Business Unit System
Accounts Payable	Requisitions ® General Ledger	Financial
Accounts Receivable	Proposals ® General Ledger	Financial
Fixed Assets	Acquire ® Retire	Financial
Payroll	Time and Attendance® General Ledger	Human Resource
Human Resource and Benefits	Recruit ® Retire Employee Self Service ® Update Human Resource System	Human Resource
General Ledger	Requisitions ® General Ledger Proposals ® General Ledger Time and Attendance® General Ledger Closing ® Financial Reporting	Financial

Whether the accounts payable system is integrated into a requisitions ® general ledger system, or integrated into a financial system, the enterprise still requires an accounts payable system. Process flow systems are simply new mindsets that will help an enterprise to realize the maximum benefits from the systems integrated into an ERP system.

Systems Integrated into the TOP 50 ERP Systems You can buy

The illustration above includes all of the systems integrated into the Top 50 ERP suppliers systems. Each of the systems is integrated into at least one of the Top 50 ERP system, but not every Top 50 ERP system integrates all of the systems.

The following sections explain each of the systems integrated into ERP systems. The last section is the checklist of required systems.

Strategic Planning System

The Strategic Planning System satisfies information requirements for the strategic planning of an enterprise’s resources. In strategic planning the enterprise’s resources are allocated to strategic business units, business units, positions, capital projects and capital equipment based on the plans. In order to measure on-plan, plans are quantified as performance measures. In order to measure within budget, resource allocations are quantified as budgets. The Strategic Planning System integrates:

1. Performance Measurement System

2. Budget System

Performance Measurement System

The performance measurement system satisfies the requirements of:

• Quantifying the plans (plans are quantified by setting objectives, and/or setting goals, and/or defining performance measures)

• Measuring on-plan (actual versus plan)

• Analyzing on-plan variances.

Performance Measurement System Integration

The performance measurement system is a view of four decision support systems.

Budgeting System

Budgeting system satisfies the requirements of:

• Quantifying the resource allocations (budgets)

• Measuring within budget (actual versus budget)

• Analyzing budget variances

Budgeting System Integration

The budget system is a view of five decision support systems.

Supply Chain Planning System

The Supply Chain Planning System satisfies information requirements for the front-end and the back-end of the supply chain. Customer relationships/demand is planned and managed in the front-end of the supply chain system, resources required to fulfill customer demand are planned and managed in the back-end of the supply chain system.

Front-End of the Supply Chain Planning System Integration

• Customer relationship management (Note: the Proposals ® General Ledger System satisfies the requirements for processing customer transactions)

• Product data management

• Product configurators

• Forecasts of customer demand and/or actual customer demand from the Proposals® General Ledger System

Back-End of the Supply Chain Planning System Integration

• Manufacture a product

• Distribute a product

• Retail a product

• Service a product

• Provide a service, i.e., professional services, service based financial services

• Rent assets, i.e., asset based financial services, property management, rental cars, airlines, and cruise ships

Supply Chain Planning System Integration

The Supply Chain Planning System is a view of four decision support systems.

Enterprise Transaction Processing System

The Enterprise Transaction Processing System satisfies all of the enterprise’s transaction processing requirements including:

• Three source ® general ledger systems

• Employee Self Service ® Update the Human Resource System

• Inventory receivers, issues and transfers

• Projects/work orders:

• Project/work orders start date/time and complete date/time transactions (project on-time and cycle times)

• Worker time transactions (labor utilization/costs)

• Material/inventory transactions (material utilization/costs)

• Equipment transactions (equipment utilization/costs)

• General ledger

Enterprise Transaction Processing System Integration

Internet Integrated into the Enterprise Transaction Processing System

E-commerce systems are integrated into the proposals ® general ledger system. E-procurement systems are integrated into the requisitions ® general ledger system. Web enabled employee self service systems are integrated into the employee time & attendance ® general ledger system and employee self service ® update human resource system.

Six Decision Support Systems

The six decision support systems satisfy all of an enterprise’s information requirements for planning, managing, analyzing, and accounting for the enterprise’s resources.

1. Strategic Plans ® Budgets System satisfies information requirements for performance measurements and budgets.

2. Closing ® Financial Reporting System satisfies GAAP financial reporting requirements. Integrates: the general ledger system, financial reporting systems, consolidated financial reporting systems and all other financial compliance reporting systems such as income taxation and regulatory reporting.

3. Front-End ® Back-End Supply Chain System satisfies information requirements for managing customer relationships, managing product data, planning and managing the resources used to fulfill customer demand and managing supplier relationships. Integrates: marketing systems, lead tracking systems, customer relationship management systems, product data management, systems, product configuration systems, manufacturing systems, distribution systems, retail systems, supplier relationship management systems, work order systems, project management systems, and service management systems.

4. Plans ® Completed Projects and Work Orders System satisfies information requirements for planning and managing projects, and/or jobs, and/or work orders. Integrates on-time project/work order management and within budget project/work order management.

5. Recruit ® Retire System satisfies information requirements for planning, and managing human resources. Integrates: position control systems, applicant tracking systems, skills inventory systems, succession planning systems, human resource development systems, benefit systems and retirement systems.

6. Acquire ® Retire System satisfies information requirements for planning, and managing property, plant, equipment and IT. Integrates maintenance management systems and fixed assets systems

Four Transaction Processing Systems

The four transaction processing systems satisfy all of an enterprise’s transaction processing requirements.

1. Proposals ® General Ledger System automates all transactions with prospects and customers. Integrates the following applications: E-commerce, proposals, bids, quotes, customer orders, client/customer contracts, billing, accounts receivable and the general ledger

2. Requisitions ® General Ledger System automates all transactions with suppliers. Integrates the following applications: requisitions, E-procurement, Web enabled bids and quotes, purchasing, accounts payable and the general ledger.

3. Employee Time Reports ® General Ledger System automates all time reporting and payroll transactions. Employee time and attendance integrates with the Plans ® Completed Projects and/or Work Orders Systems to plan and manage the productivity of human resources. Integrates the following applications for payroll processing: Web enabled time & attendance, payroll gross calculations, payroll gross to net calculations and the general ledger

4. Employee Self Service ® Update Human Resource System automates all transactions with employees that update human resource systems. Integrates the following applications: position requisitions, position updates, applicant updates, new hires, terminations, wage and salary changes, employee updates, skills inventory updates, performance appraisals/reviews updates, benefit enrollments, training updates, safety updates, retirement updates, etc.

Required Systems Checklist

User Interface

• Web portal ¾ an enterprise standard user interface for the ERP system, personal productivity tools, e-mail, intranets, extranets and the Internet

Enterprise Resource Planning Systems

• Strategic Planning System ¾ a view of 6 decision support systems

• Supply Chain Planning System ¾ a view of 4 decision support systems

Enterprise Transaction Processing System

• Transaction Processing System ¾ requires 3 source ® general ledger systems, employee self service ® update human resource system, inventory transactions, projects/work orders transactions, and a general ledger

Decision Support Systems

• Strategic Plans ® Budgets System

• Closing ® Financial Reporting System

• Front-End ® Back-End Supply Chain System

• Plans ® Completed Projects/Work Orders

• Recruit ® Retire

• Acquire ® Retire

Transaction Processing Systems

• Proposals ® General Ledger

• Requisitions ® General Ledger

• Employee Time and Attendance ® General Ledger

• Employee Self Service ® Update Human Resource System

• Inventory transactions

• Project/work orders transactions

System Foundation

• Enterprise standard terminology ¾ i.e., define a sale as a booked sale or GAAP legal sale, or define an employee as a worker who’s productivity has to be managed, or as a worker eligible for benefits

• Enterprise standard numbering schema ¾ one standard number for every resource, i.e., products, services, materials, property, workers/employees, plant and equipment and one standard number for every relationship i.e., customers and suppliers, plus a standard chart of accounts, a standard project work break down structure and a standard numbering schema for work orders.

• Enterprise database ¾ the enterprise database is delivered off-the-shelf as part of the ERP system. Implementing the enterprise database requires the enterprise to adopt standard terminology and to adopt a standard numbering schema.

Conclusion

ERP evolution over the years has addressed many business needs. Solutions have been created in response to real life situations faced by thousands of organizations over the past half century. In this article I have attempted to provide some practical insight to the structural components of a fully integrated ERP solution so that practitioners can see through the fog created by systems complexity. Understanding the needs of your organization provides a useful first step in determining the way in which to deploy ERP in your organization.