What does ERP mean?
Classification of business information systems (BIS).
BIS are all information systems within the framework of one enterprise wherein data is accumulated on the business, so that they serve as a basis for analysis, planning, execution and control of business processes. Business Management Systems (BMS) are a special case of BIS; another particular case are the systems of tax accounting (the accounting programs – in a popular way). Within a particular meaning the ERP systemsappear to be the most perfect class of such systems as, by definition, the ERP system comprises the analysis, planning, execution and control of all units in the enterprise.
The provision of companies with software passes through several stages. Individual systems for the different units are installed initially, an attempt to integrate them is then made or a new integrated system is purchased and at the end a transition is made to an overall system that includes not only the day-to-day management, but also planning and control over the entire activity as a complete unit. Let us consider the stages and their corresponding classes of software products.
1. Software to meet the needs of one department (base systems).
About 60-70% of the information systems used in Bulgaria belong to that class of software, with their share gradually falling. This class is subdivided into several basic types according to the department they serve:
a) Trading activity management systems
Software that is called ‘Warehouse programs’ in everyday language belongs to this class. The systems of this type serve for processing daily information, issue of documents and allow the retrieval of various references. Traditionally, this kind of systems has no accounting module and quite often they even have no connection to such a module. Usually, this last fact poses no problem as it is not a secret for anyone in Bulgaria that tax accounting is in a serious mismatch with the operating activity and links of that kind are not only quite unnecessary but are often directly avoided.
b) Tax accounting systems
What is often called ‘Accounting software’ belongs to this type of systems.
The systems of this type have no managerial functions – they are designed to serve the tax accounting of the company. All outside parties that the company shall provide reports to –
the state, shareholders and so on must be added to the system of tax accounting. Sometimes the systems of this type have a ‘warehousing’ module, its main focus being the presentation of business for tax purposes. Exactly because of this focus of the ‘Warehouse management’ module it often appears to be insufficiently functional to be used in the operating activity of the company.
It is important to note a peculiarity of the accounting programmes. As they are directly intended to serve the company’s tax-accounting, in an environment where they are not integrated in a unified corporate system, they often work after a paradigm under which accounting documents appear to be the primary ones, while the primary documents appear as a consequence. This paradigm is extremely appropriate when used in an isolated accounting department, in particular – in an external accounting company. The issue, for example, of a tax invoice in this model takes place by entering its posting and then calling the function ‘Print this item in the form of an Invoice’.
Note: With integrated systems and the ERP systems things are absolutely the other way round – primary documents are entered and their posting comes as a consequence (quite often posting is even invisible).
Initially, this work model is stressful for accountants who are accustomed to work after the accounting work matrix. This model of work requires the service of qualified accountants for the entry of even the simplest invoices. This is not a problem for an isolated accounting department, yet it becomes a serious obstacle where an attempt is made at implementing a similar system to e used by the other departments. This is quite natural because, for example, a businessman is obviously not willing to enter postings for the sake of one sale only. Due to this particular feature of the accounting software in reality it is very difficult for it to develop into an integrated system that will be used by all departments of the company.
c) Salary calculation systems
As suggested by the title, the main objective of these systems is to calculate salaries, print out payroll slips, effect mass non-cash payments, reporting to the NSII and other related activities. These programmes are also mainly oriented to the tax accounting (and not to the managerial one).
The systems for all other departments ought to be included in this type – production, marketing, logistics, etc. Despite their importance these departments are often the last in the software priorities forced to ‘patch up’ in the meantime their needs with electronic tables, paper documents, etc. It is very often the case with such departments not to receive their own individual software systems at all, but to be provided right on when time comes to purchase an integrated system.
2. Integrated systems (IS)
Systems of this class are used by about 25-30% of the companies. Upon expiry of the initial phase of provision wit information service of all section there comes the time for every company to start feeling a serious need of integration of the individual software products. Problems will occur that were not important initially, where the scope of activity increases. Redundancy of information in the individual data bases becomes more and more costly to service while the overall efficiency of information security decreases.
Logically enough, as a result of such needs the integrated systems come to the fore striving to cater for the needs of many departments through a unified system. Traditionally, integrated systems have a minimum of subsystems to service the operating activity (frequently called, roughly and inaccurately, Warehouse Management) and an Accounting subsystem that can be used both for tax and managerial reporting.
Owing to their very essence integrated system are implemented with more difficulty than the base systems. This is due to the fact that IS are not only in service for all departments, but they enter the sphere of communication between departments. This is exactly the point where one of the biggest problems occur for this kind of systems, which results, sometimes, also to an implementation failure. All too often in the company where IS are implemented, rights and obligations of the departments, the sequences of action are not set clear, etc. Very often data concerning some activity, with which a particular department operates (e.g. Accounting) are not quite the same as those another department operates with (warehouse, management). These divergences, even if they occur systematically, if not too big, are neither reconciled, nor the reason for such divergence is sought for. Where IS are implemented such divergences can not be tolerated any more. The software is frequently accused at this point, but the problem is that there is no way anymore to disregard these inconsistencies. All the more that here we are not talking about intentional abuse (although this could be a possible cause for such divergences too); rather the case in point here is the absence of particular systematic order of data input and process between departments.
In contrast to the ERP systems (as described here below). IS have no common methodology, which is an obstacle to the universal training.
3. Unified enterprise resources planning systems (ERP)
At least for the time being ERP systems are considered to be the highest class of software. A similar kind of systems is used by 5-15% of the companies in Bulgaria. In spite of the considerable advantage they provide, in comparison to base systems because of their integration, IS are still intended to serve day-to-day activities. For that reason they prove to be incapable of catering for the needs of a company of a corporate type. One of the main distinctive features of ERP, compared to IS, are the widely expressed capabilities for unified planning of the entire company and performance control. Planning of resources – material, long-term, in-time, human, financial, etc., is of extremely great importance for corporations. And this is the main objective of the ERP systems – overall catering for the needs of corporate companies.
Systems of the ERP class are very capacious as they provide service not only to all departments of one (relatively) big company, but they also go into great detail in the work of each department. The implementation of an ERP system takes much time all too often, as it requires the serious cleaning of business models and full detailing of information streams. Thanks to these requirements the introduction of such a system has a wholesome effect on the organization as a whole. Yet here we have one of the biggest problems facing the implementation – quite often managerial staff in the individual sectors are unable to properly assess the need of such a system and lack the requisite training to take in that kind of overall integration of company data. It is recommendable prior to implementing an ERP system for all managerial staff from all sectors to undergo training courses that will give them a much more precise idea of the benefits, what should and what they should not expect from a system of that kind.
It must be pointed out that all ERP systems share a common ideology. That ideology is a concrete methodology of work (allowing customization, of course), which was described for the first time as early as the 60’s of the last century. Quite naturally, the methodology has been developing in time, yet, despite the newly arising branches one can still say that all ERP systems share a common central methodology. This is extremely important in the process of training staff to service that kind of systems – there are so many courses that bear no direct relationship with the particular ERP system and are valid for all of them.
(c) 2006 Aloe Co