Introduction to ERP for beginners

A company is made up of multiple departments. Each department has its own goal and performs a list of activities to achieve that Goal.
You may be knowing about departments like - Sales, Purchase, Accounts, etc.
Let us check what these departments do in detail.

(Imagine YOU are the Owner of the Company and all departments are managed by you.)

1. Sales Department - Takes care of finding new customers and winning orders. They will create a Sales Order, after winning the Order. And the whole company will work to deliver the goods promised to the customer, as per the Sales Order. Sales Order is an Agreement between us and the customer, that we will ship goods to the customer and he will give us money in return.
2. Purchase Department - Takes care of buying "raw material" or "traded goods" or "office use stationary". Purchase Order is created in the ERP system based on the material need of company. Purchase Order is an agreement where we promise to pay money to the supplier after receiving the goods from him. Purchase Order Print out will be sent to the supplier.
(Extra Knowledge - Some Companies will be doing Trading Business. Buy from Supplier and sell to the customer after adding their own profit. They will not buy Raw Material. They will buy Traded Goods directly.)
3. Warehousing Department - Takes Care of Inventory Management. They are responsible for receiving Goods Purchased by Purchase department. Shipping the Goods to the customer, sold by Sales Department. Issuing Raw material to Manufacturing Department.
4. Manufacturing Department - This is the Factory where finished Goods are produced. Manufacturing Department takes Raw Material from Warehousing Department and follows the Operation Steps, to produce the Finished Goods. Once the finished goods are ready, they will be sent back to the Warehouse. Then Warehousing Team will Ship it.
(Extra Knowledge: Discrete manufacturing and Process manufacturing are two types of Manufacturing process. Assembled goods like Automobile and Electronics are examples of Discrete Manufacturing. Chemical is an example of Process Manufacturing.)
5. Planning Department - Planning of Machine and Labour Utilization. Based on the Sales Forecast, Planning department will create a Plan for Producing the Finished Goods; as per the expected delivery date. They will plan the quantity of goods to be purchased by procurement department. They will plan the production, as in which machine and which employee will be working for what time. They ensure the resources of company are used to its optimum level and delivery deadlines are met.
6. Accounts Payable Department - Payable department pays to the supplier from whom goods are purchased. Supplier will send invoice to the Accounts Payable department. This department will check the Warehouse Receipt details and compare with supplier invoice value. If the "value of Purchase Order sent to the supplier" and the "value of Warehouse Receipt" and the "value of Invoice" match the supplier will be paid. This is called 3 way matching. This ensures we pay for what we purchased.
7. Accounts Receivable Department - After the Sales Order is shipped to the customer. Accounts Receivable department creates a Sales Invoice and sents it to the customer. Accounts Receivable team will chase and receive the money from customer.
8. Asset Management Department - Company will have many assets like Machine, Laptop, Fan, Table, Chair, etc. These assets will have a value. This value will depreciate as these assets grow old. Quantity and Value of these Assets will be tracked by ERP System. Any time finance can check what is the asset value owned by company.
9. Service Department - This department will take care of maintenance and servicing of goods sold to the customer. Customer will be charged based on terms of warranty. The Warranty details will be available in the Sales Order.
10. Human Resource Department - This department takes care of recruitment and Calculation of Pay role. If Manufacturing department needs more employees they will raise a request to HR department listing the required skill set. Then HR department will do the Hiring. HR department will calculate the Payroll and tell the Accounts Payable department to Pay a monthly salary to the employees.

Just imagine how difficult it will be to manage the above company without the use of any software.
Enterprise resource planning (ERP)
ERP is a single software used by all these departments.This data is stored in a central location and can be accessed by all these departments. Thus integrating the whole company together.



ERP Vendors:
ERP software suppliers come in all shapes and sizes, with the vital business process software available as a client-server application, a hosted ERP service or even via a web-based portal.
Top 5 ERP Vendors are-
1. SAP
2. Oracle
3. Infor
4. Microsoft
5. Epicor