Business processes can be linked to ERP to gain significant advantages and to achieve specific goals. A complete understanding of the traditional method in conjunction with the ERP method of business processing will help in opting for the right method to achieve success. This article is all about business processes and use of ERP for those. The below content also explains how traditional method differs from the ERP method in establishing the business processes.
First of all, let us understand what a business process is and what ERP systems are. Then we shall proceed to explain how both are linked to each other; and what are the benefits and failures of ERP systems.
What is a Business Process?
A business process is a collection of many related and structured activities that create a specific output or service for a particular market or customer. It shows the way in which work is done in a business with a specific mention of the order in which the work is done. It is most often visualized as a flowchart and is depicted as a sequence of activities from the start to the end with well defined inputs and outputs.
Business processes are basically of three major types, namely, Management process (those that include governing of the business systems like corporate governance, strategic planning, etc.), Operational process (those that include involvement with the core business like sales, marketing, manufacturing, advertising, etc.), and Supporting process (those that include support activities for the core operational process like accounting, support centre, recruiting, etc.).
What is ERP?
It is an integrated application that is computer-based for the internal and external management of assets and resources involved in a business. It includes management of all tangible assets and materials, financial and human resources to facilitate easy information flow between all the services of an organization. It is an acronym for the term, “Enterprise Resource Planning”. Examples for popular ERP systems include SAP, PeopleSoft, etc.
How does it work?
The ERP system is an integrated software system that is used widely across many businesses and industries. It is built on a centralised database that uses a single common platform to consolidate all the business operations into a unified environment. With data collected and stored in a single repository, it allows for easier management across different modules of the organization without the need for multiple storage systems. They integrate many functional components of a system like sales & marketing, production planning, inventory management, finance, human resources, etc.
How is the ERP system in business process different from the traditional process?
The traditional method of business involves in channelling power and resources through various departments involved in the business like accounting, finance, inventory management, etc. This ensures that the main focus is on the functional departments and the way in which resources are flown for effective realization of the goal. In an ERP method, contrary to the traditional method, the focus is on the business process and not on the functional departments.
Resources do not flow through the departments, but is stored in a single repository and utilised effectively by the departments so as to create an integrated environment. This integrated environment works towards creating a value add for the customers and the business. In a nutshell, in the ERP method, the functional departments and other resources co-exist and ensure that the business processes and customer value add takes precedence over the other things.
Benefits of ERP
The integration of business processes and data into a single system plays a crucial role in achieving business goals. This kind of a setting improves co-ordination and reduces redundant jobs. The co-ordination between the functional departments improves the efficiency and productivity in the various departments. As an example, the co-ordination of data between the order tracking system and the accounting of the orders will help in analyzing the profits on a granular level.
The ERP systems also help the top management to analyse the progress on a day-to-day basis. With establishment of a proper integrated system with the DSS (Decision Support System), the ERP systems can be effectively used to perform resource planning as part of the business strategic plans.