Enterprise Research Planning is a set of business processes that allows companies to provide their customers with products or solutions on time, economically, and as quickly as possible. Many of today’s most successful companies incorporate ERP into their planning to optimize resources such as materials, labor, equipment, tooling engineering specifications, space and financial resources.
ERP targets what’s required to achieve a company’s overall objectives, when it’s needed, and the quantity that will be needed so that resources can be matched to the right time and place to ensure the most economical, rapid response to customer demands.
Anticipating Constant Change
Businesses are often able to predict such things as demand and volume within reasonable parameters, but in reality everything is always in flux. As a result, to maximize efficiency and profitability, businesses need to allow adequate lead times and must manage their work centers to accommodate changes in orders, sequencing and other constantly changing factors.
ERP is designed to help businesses manage their way through a landscape of constant change.
Starting with a Business Plan
Most companies have a business plan before they even start operations. This type of strategic planning defines the overall goals and objectives that are to be achieved. From this, the overall plan for the company can be mapped out, taking into account the anticipated demands of the marketplace — such as customer orders, forecasts and other predictable factors — as well as the ability of the business to respond to these demands through people skills, technology and available resources.
Financial targets are then plugged into the equation: How much profit, cash flow and growth can be realistically achieved? At the same time, strategic goals are considered, such as customer satisfaction levels, improvements to quality, reductions in cost, improvements in productivity, and so on.
Planning Sales and Operations
Once the business plan is mapped out, the next step is planning sales and operations. This provides an operational plan to turn the business plan into reality. Where the business plan is measured in dollars, the sales and operations plan is measured by such factors as number of units manufactured, standard hours, and so on.
The sales and operations plan builds the overall plan of attack for sales and marketing, engineering, manufacturing and purchasing, and finance.
The next step in the ERP process is forecasting and sales planning: An anticipated monthly rate of sales for a particular product — or family of products — is generated. This can then be used to create sales quotas, plan marketing, and create other measurable goals for management and operations to achieve.
Customer Ordering and Fulfillment
After that, customer order and entry and promising is established. This is the process of taking incoming orders, determining product availability and planning the most efficient order fulfillment processes. Once this process is underway, it can then be looped back into the forecasting module in order to fine tune the entire process so that it has more accuracy and efficiency.
This then allows the company to set production schedules, inventory levels, reordering schedules, work schedules and nearly every part of the efficient operation of the business.
ERP has become an integral part of practically every successful operation because it allows companies to respond to constant change while simultaneously maintaining maximum efficiency and, as a result, higher profitability.