Imagine a company that "runs" like a well-oiled machine - processes run like clockwork, all employees have all the relevant information and know what to do immediately, production, warehousing and distribution run like clockwork, and management has all the necessary reports and analyses available on a regular basis. But why stop with just ideas - this is what it can look like in your company. All it takes is one "little thing" - a properly implemented ERP system.
In today's dynamic business environment, information systems play a key role in ensuring effective management and competitiveness of small, but especially medium and larger enterprises. One of the most important and comprehensive information systems is the so-called ERP system (Enterprise Resource Planning) - software for enterprise resource planning.
An ERP system is an integrated information system designed to plan, manage and monitor all key processes and resources in an enterprise. In addition, it streamlines, refines, and above all automates business processes. It includes - or at least can include - basically all divisions or departments of a company such as finance, warehousing, manufacturing, human resources, distribution and others. An ERP system is used to collect, store, process, and analyze data, allowing a company's management to gain a better overview of its operations and manage them efficiently - and therefore reduce costs.
But let's move from general - and somewhat abstract - definitions to a more practical and illustrative description of an ERP system. You can think of it as a complex relational database with linked forms, in which users (employees) process part of the business agenda by entering data into the ERP or retrieving and using it for their other work. Each organizational unit (department or division) of a company usually needs its own application or software to ensure that the needs of that unit are met. With an ERP system, each department gets its own de facto application, with added value: it can communicate and share data with everyone else in the company. All of these "applications" are part of the ERP system, or are modules of it. The modules typically cover the following business agendas and processes:
In principle, it can be stated that an ERP system "full-fledged" (i.e. with full integration and with all modules, including any customized modules) can comprehensively cover all business agenda and processes.
Another - already mentioned in passing - benefit of an ERP system is the centralization of data in one place. All data and information for company management is thus entered only once and can then be used by all relevant departments in a very simple way. This avoids errors that occur when different dedicated applications are used instead of the ERP system, which are not integrated and do not communicate with each other. And vice versa: a change or update that a user enters in one of the ERP system modules is written in real time to the other modules and then displayed to all relevant employees, who can be sure that they are always working with the correct and up-to-date data.
We explained what an ERP system is and what its advantages are. But how long have ERPs been with us and what has been their evolution? The first interesting thing is the complexity and computational complexity of current ERP systems - it is at such a high level that until the 1990s it was not possible to implement such software at all, or to run it on ordinary commercial hardware. Thus, the emergence and massive expansion of ERP systems has been driven by the rapid development of hardware, the development of the vision of an integrated information system, and especially the willingness of companies to adapt to the type of business processes for which ERP systems are optimised.
A kind of ancestor or original development phase of ERP was the so-called MRP systems (Material Requirements Planning) in the 1970s. Interestingly, the spiritual father of MRP was Joseph Orlicky, a Czech who emigrated to the USA after World War II. MRP was a software designed for manufacturing companies that used inventory levels, production schedules and BOMs to recalculate data and generate "recommendations" for purchasing parts and starting production. An improved version of MRP II followed in the 1980s, which eventually evolved into the current ERP systems in the 1990s. According to Gartner, these had to meet quite demanding criteria for the time:
The very first system was from the German SAP and its first user was the chemical company ICI.
Based on relatively recent history, there were approximately 16,000 ERP systems implemented in the country in 2007:
Currently, the most widely used and proven ERP systems in the Czech Republic and worldwide are those from Oracle.
The implementation of an ERP system brings a number of benefits to businesses that can contribute significantly to their success and competitiveness. Let's go through the main ones:
We don't want to get you drunk on the marketing roll and pretend that ERP systems only bring benefits, positives and certainties despite all their undeniable advantages. So let's take a look at their flip side:
You shouldn't get an ERP just so you can tick "enterprise information system implementation" off your to-do list. Be clear about why you want an ERP system. Think about the benefits you will get. When choosing an ERP system, it is absolutely essential to first analyze the needs and requirements of your business. You must consider both the technical aspects (e.g. availability, extensibility) and the functionality and support for specific areas of the business.
We recommend that you take the following steps before selecting an ERP system:
Ask potential vendors for a quote or post the request on your website. When selecting suppliers, shortlist them based on an evaluation of each ERP system, taking into account the references provided, the number of times the system has been installed by the supplier and their knowledge and experience. This will limit the number of acceptable systems. An important criterion at this stage is the final cost of implementation, which usually depends on various factors. Among the most important factors are the number of active users and features. Therefore, already in the previous selection process, clearly determine what functions you actually require from the ERP system and how many employees will actually use it.
As we mentioned above, once you have selected an ERP system, it is important to implement it properly and provide sufficient training for your employees. This will help maximize the benefits of the ERP system and ensure its effective use in your business.
One last tip: be patient. Selecting and implementing an ERP system is not a sprint, but a marathon, and using it is not a date, but a partnership for life. At least, that is, until you upgrade.
ERP systems are an integral part of modern business and contribute significantly to the competitiveness of companies. Implementing an ERP system allows for process automation, improved management, optimized inventory management, more efficient financial management, and above all, cost reduction. When selecting an ERP system, it is important to consider the needs and requirements of a medium-sized enterprise and choose a reliable implementation partner.
With Algotech, you don't just get a proven supplier and implementer - we share our know-how and decades of experience and knowledge of ERP system implementation. You can trust us - we connect you with companies that provide references before implementation. Contact us, arrange a free consultation and step towards a future where your business runs like a Swiss watch.