Everything You Wanted to Know About but Were Afraid to Ask

By SmallBusinessComputing Staff
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by Kevin Hogan

Each month on this page we take some of today's most popular yet arcane techie-speak and translate it into POE (Plain Old English). This month's term emerged from the world of corporate MBA-types and sophisticated software architectures. Uses of it are beginning to crawl into everybody's business, large or small, not just the Fortune 500 giants. Read on to see if your business might want it:

What Is It?
Is it software, a conceptual strategy, or just another confusing buzzcronym? Enterprise Resource Planning (ERP) is actually all three. Tech industry insiders use this term to describe the digital automation of any and sometimes every task a business might do everyday. Using a comprehensive set of software and a good bit of employee training, an ERP system can tie processes such as purchasing, inventory maintenance, customer service, marketing, and sales into one cohesive system that works across an enterprise of any size.

Sounds great right? Here's a bit of a reality check. Deploying ERP involves a substantial investment, of both money and man-hours. Remember a few years back when the "re-engineers" began to fiddle with the way corporate America did business? A large part of those new technology configurations involved implementing million-dollar networks stuffed with ERP code. Thanks to that über-operating platform called the Internet, installation and maintenance costs for similar applications ­ while still expensive and complicated ­ are now at least possible for the every-business. Right now implementing it is a decision. Soon enough, it will be a necessity.

How Does It Work?
So much for the buzz. Now here's the theory. The best way to explain ERP is to follow the bouncing check. Let's say a customer orders a widget and tries to pay for it via snail-mail with a check. In the paper-based world, that process would take that check through a number of different departments and desks ­ sales, accounting, inventory ­ before the check would be found to be in default. With ERP, once that check is entered into the system, every department has access to it at the same time. Assuming the system is tied into the bank, the check might even be accrued in real time. The same process that might have taken days to transact can happen in hours, if not minutes.

Why Do I Want It?
Everyone having access to the same data at the same time can have an enormous effect on a company's efficiency and productivity. Because data is entered only once, the likelihood of mistakes diminishes. Because everyone's "inbox" receives the data at the same time, there are no time drags like in the linear paper world. Work gets cycled more quickly, which means capacity can increase. Management can watch the workflow in real time, which means smarter decision making when it comes to things like creating work schedules or ordering supplies. Having all this information at a CEO's virtual fingertips also means more assured strategic planning at the top.

Where Do I Get It?
Here's where the software comes in. ERP systems come in all shapes and sizes. The most popular right now are all-in-one, top-down solutions. You can also cobble together your own ERP using a variety of different apps. Either way, get ready to deal with the consultants and hold on to your pocketbook. Bare-bottom prices will still be in the tens of thousands of dollars and most likely will go way up from there.

The major players in the corporate market who have recently turned their sights towards smaller businesses include SAP (www.SAP.com), Peoplesoft (www. peoplesoft.com), and J. D. Edwards (www.jdedwards.com). Since no ERP system will work without a bulletproof database management system (see Afraid To Ask, January 1999), Oracle is also a good place to start. Also search out smaller software companies that might provide an ERP-type solution in your particular vertical market.

On a final note, I am sorry to write that this will be my last column for Small Business Computing. Thanks for reading and be sure to look forward to bigger and better things on this page!
This article was originally published on May 01, 2000

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