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Enterprise Resource Planning (ERP) for Small and Medium Enterprises (SME)

Updated on September 6, 2014
C.V.Rajan profile image

C.V.Rajan is a retired Engineer. Backed by 3 decades of industrial experience, he writes on several aspects of business, management and HR.

Enterprise Resource Planning (ERP) is an integrated Information management system to encompass practically all the activities of a large business organization. What ERP tries to accomplish is to integrate data and processes of an organization to a single system working on a unified and common database.

ERP came in originally meant for mammoth organizations to bring in a fair sense of order and balance amidst chaotic pulls, pressures and distractions between various departments and units. However, the tremendous knowledge and experience gained by ERP vendors over the period of time in fine tuning the ERP functionalities has made the ERP systems to be flexible and efficient enough to cater to the needs of a wide spectrum of organizations, whether they are in manufacturing or in service, whether they are massive organizations or SMEs.

A typical ERP system consists of several functional modules and the trick of the trade is to make use of the appropriate modules to suit to the specific organizations needs and integrate them seamlessly. An ERP system for, say, a manufacturing firm may include the functional modules of Manufacturing, Production Engineering, Plant Maintenance Management, Quality Assurance Systems, Pay-roll, Financial and Cost Accounting, Personnel Management, Warehouse Management, Supplier/Vendor Management, Sales and Distribution Management, Customer Relations Management and so on.

Typical modules in an ERP
Typical modules in an ERP | Source

It is up to the organization to pick and chose the most appropriate modules that can potentially contribute in improving the overall efficiency and cost competitiveness of the organization and integrate them with their existing systems and practices. It calls for necessary gives and takes, adjustments and minimal need on customization. Other than the costs of ERP, it requires a high degree of commitment from management and staff, the involvement of consultants and functional specialists to fine-tune the system best suited to the organization and a definite time period for acquisition of hardware, software, deployment of manpower, system transition and trouble-shooting.

Once a neatly ironed out ERP system is in place, the management can be assured of an all-encompassing view of their customers, products, and operations. This can immensely help in formulating better business strategies, management practices and quality processes that in turn can help lowering prices, and providing better, higher quality of products and services to their customers.

Can SMEs afford to invest in ERP?

Unfortunately, the cost of investment in "owning", maintaining and updating a robust ERP system is disproportionately too huge for the scale of operations of SMEs. Other than the costs, the need of deploying competent, qualified and experienced personnel to maintain it and milk the benefits out of it may turn to be too daunting a task to SMEs.

To put it in a simple analogy, the market demands of competitiveness today force a common man to look like a king, but the commoner has no wherewithal to "invest" to become a king. What's the way out, then?

This is where ideas like "on-the-cloud computing" and "managed services" come into picture. In simple terms, it is this idea: Do not own, if you can rent; do not break your head to learn the nitty-gritty, if someone else is available to do it for you for a fee.

The Cloud of resources and the rain of Services.
The Cloud of resources and the rain of Services. | Source

What is cloud computing?

Cloud computing is an emerging trend in technology for information processing and management, with tremendous potential for growth in the future. In cloud computing, the idea is not to own hardware and software but to hire them and operate then trhough Internet. We will only pay for utilizing the software, hardware, data storage and processing, and information management services from a Service provider through high speed broadband Internet connection, only to the extent and proportion of our utilizing them, just similar to our paying electricity bills. Alternative payment models similar to monthly subscription (like subscription to a printed magazine) or even fixed monthly charges (irrespective of usage) are also available as options.

ERP packages, re-packaged for SMEs like Supply chain management, Customer Relation Management, Warehouse Management and so on too are available through cloud computing, neatly configured to meet the needs of the business model that a firm fits to. It means that the huge capital investments typically needed for owning, operating and maintaining costly ERP systems (both hardware and software) are avoided.

So, the day is not far off for SME's to take full advantage of ERP packages with little capital investment, but through periodic (monthly) payment charges off the Cloud computing model.


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