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The changing face of ERP

Tom Paye | July 31, 2013
SAP IT expert explains how the automotive production line can be used to perfectly illustrate the need for enterprise resource planning (ERP) software in large enterprises.

"Imagine Henry Ford in 1900 explaining to his world that an assembly line will help to produce more cars. Nobody would dare to challenge this today. At the time, the change of putting the production of a car into a structured process will have meant dramatic change and push-back. Today, there are only boutique car manufacturers who can afford to produce without the assembly line."

So says Steffan Reisacher, Mobile and Process Lead, Strategic Business Development, EMEA, SAP. It might be strange to hear an enterprise IT expert speaking about how cars are produced, but he explains that the automotive production line can be used to perfectly illustrate the need for enterprise resource planning (ERP) software in large enterprises.

"The assembly line is for the car industry what enterprise resource planning, or management (ERM), is for any process in business. ERP simply helped to make information available everywhere in the organisation and, in the best case, process it automatically," he explains.

"Did the truck leave the company? Can we bill the customer? Can anybody please check if he paid? Every piece of data was accessible for the next person in a well-defined business process and automatically posted in accounting. The costs of cooperation with customers, suppliers and within a company were reduced dramatically."

ERP solutions evolved from material resource planning, which enterprises across the world had adopted in the 1960s in order to run more efficiently. According to Swaminathan Natarajan, Oracle Fusion Applications Leader, the carmaker Toyota was among the first to implement such ideas as inventory planning and costing. Later on, accounting was thrown into the mix so that payables and receivables could be managed easier, and so ERP was born.

"More and more manufacturing organisations started using ERP solutions. Service organisations also started using ERP concepts like financial management (payables, receivables, asset management) to automate and streamline their processes. ERP solutions further evolved to manage asset-intensive organisations like aviation or telecoms," he says.

According to Reisacher, though, it was SAP that pioneered the ERP market in 1972, thanks to it developing a standard software instead of attempting to build bespoke ERP solutions for each and every customer. "Selling a standard software is much less time consuming than producing it customer by customer. Hence SAP was able to rapidly gain the majority of the market," he says.

Whoever started it, though, the ERP market is much more diverse now. Oracle would certainly describe itself as the current-day leader, while smaller vendors like Infor point to the big two as outdated and proclaim themselves a viable third option. Either way, though, all ERP vendors are working to bring the technology into the future.

 

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