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Where is the 'Planning' in ERP?

|Jul 10|magazine14 min read

Click here to read this article on our interactive reader in the July issue of Business Review USA!

Written by Linda Cade

In today’s economy, everyone is trying to do more with less. Economic indicators tell us that manufacturing is beginning to pick up, but we’ve heard that before. Business analysts are predicting an upturn in overall business in the coming months. Unemployment rates are lower than they’ve been in years. That’s all good news, but none of us are ready to return to the days of unmonitored spending or extravagant hiring practices.

For many businesses, the largest asset after personnel is inventory. For many of those same businesses, the largest potential expense after payroll is the cost of the inventory that sits on the warehouse floor. In the face of economic challenges, some very smart people have developed various methods to help minimize the impact of assets tied up in unused inventory and wasted warehouse space. You’ve undoubtedly seen the acronyms and come across the names:

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Each of these methods or best practice guidelines brings its own philosophy as to the best way to coordinate, estimate, plan and purchase materials and goods to accomplish high efficiency, quick inventory turns and maximum profitability. But where does your ERP system fit in all of this planning?

An effective ERP system provides the integration across multiple functions within your business needed to establish the foundation for any of these methods. Additionally, the ERP system provides the ongoing business intelligence to drive the decisions that are the key to the success of the method. So let’s break it down and take a look at how it all comes together.

Each operational planning method includes some combination of data elements drawn from the ERP system:

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Even though the information is drawn from the ERP system, it is spread across multiple sources. For example, the work order scheduling function provides the capacity information while the Material Requirements Planning function predicts and recommends purchasing or manufacturing activities. Other elements may require a compilation of data from multiple sources. Illustrated here are the ERP sources for the elements required for operational planning:

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The information provided by the ERP Solution may require some translation or transformation to be easily understood as the elements of the Operational Plan.

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The key to unlocking the information and enabling the planning process is Business Intelligence. With a good intelligence tool and perhaps some creativity, an Operational Planning Dashboard based on your ERP solution data can facilitate your planning committee meetings and streamline your procurement process. 

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As a result, the implementation of an operational plan becomes a reality. This reality drives positive changes in your business processes and results in improvements such as the following:

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So, where is the planning in Enterprise Resource Planning? It starts with the basics.  Look to your ERP system to provide the building blocks. 

·         Using your inventory management features, systematically examine your inventory setup, warehouse layout and workflow and replenishment parameters. 

·         With the information from your CRM tool, examine your sales channel and pipeline for potential changes in the market.

·         Based on the information in your Accounts Receivable and Sales Order modules, gather as much data as possible about your customer profiles and buying habits.

·         Using the data from Accounts Payable and your Purchase Order systems, evaluate your vendors based on performance and quality as well as pricing.

·         Implement and track quality measures during the receipt of stock through the Purchase Order process and/or the production of goods using the Routings and Work Order steps in manufacturing.

·         Involve your employees in continuous improvement and productivity efforts and monitor their results using Shop Floor Control or similar tools.

Then finally, by leveraging the features and data delivered by your ERP system, you can implement the operational plan of choice and reap the results for your organization.

About the Author: Linda Cade is a product marketing manager for Sage 500 ERP and is based out of the Sage North America office in Irvine, California. Cade began her tenure with Sage in 2000 and has served in various positions including customer support analyst, customer support manager, customer support training manager, customer support account manager and product manager. Additionally, Cade has over 30 years of experience in multiple business environments including retail, distribution, manufacturing, banking and financial management, real estate development, tax preparation and booking, restaurant management and law. Cade is a certified bookkeeper and is a member of the National Association of Certified Bookkeepers. Cade was named a member of Cambridge Who’s Who in 2008-2009.