What Is SAP ERP?

A big opportunity for ERP to help manufacturers is in the supply chain management area. DRP, or distribution resource planning, refers to the management of inventory throughout the supply system. Due to the many sources of variation throughout the supply chain, current inventory management practices tend to be extremely reactive. Many firms today consistently target the logistics and distribution areas as processes that could provide significant future cost savings.

In most organizations, there are very large gaps between both upstream and downstream logistics and the manufacturing operation. The hand-offs can be very difficult to manage. By integrating the output of an MRP II module with a raw materials inventory management tool, one has much better insight into the raw materials warehouse functioning (upstream integration). Likewise, by having a better production schedule, variance from the production plan can be reduced. Production information directly feeds a finished goods inventory management module (downstream integration). The result: a greatly improved ability of businesses to understand and manage their supply chains.

An important factor influencing the rise of the ERP industry is the move towards client/server technology, or "distributed computing." Rhetoric aside, this means using lots of little computers instead of one big one for a business's computing needs. Given ERP's attempt to line up all of a company's functional links into one big supply chain, you might think that the one big computer would be a better fit.

Actually the opposite is true. By taking a modular approach to ERP, software programs can be kept small enough to to run on personal computers. Additionally, since many important production and inventory decisions tend to get made in different places and at different levels throughout an organization, ERP and its toolbox of software functions is a good fit for distributed computing.

Clearly, there are some issues in production and inventory management that can be improved by a well-developed ERP tool and well-managed implementation. Many vendors are working on ERP offerings, and it's no wonder: each contract and installation may mean hundreds of thousands or even millions of dollars in software and consulting! At this point you probably understand the reasons for the ruckus on all sides: big promises, big dollars, and big software. However, as we alluded to earlier, there remain some significant questions that must be addressed before anyone else joins in the stampede.

ERP SAP