Erp Overview

Information in large organizations is often spread across numerous homegrown computer systems, housed in different functions or organizational units. While each of these “information islands” can ably support a specific business activity, enterprise-wide performance is hampered by the lack of integrated information. Further, the maintenance of these systems can result in substantial costs. For example, many of the older programs cannot properly handle dates beyond the year 2000, and they must be fixed at a steep costor replaced. 2 While the Y2K bug has been fixed over time (at an estimated cost of $600 billion worldwide), the lack of integration is a pervasive problem. Consider, for example, Boeing, which relies on hundreds of internal and external suppliers for the millions of components needed to build an airplane. The goal of putting the right parts in the right airplane in the right sequence at the right time was managed at Boeing by four hundred systems that were designed in the sixties and were all but integrated. Information inconsistencies were prevalent and the systems were not synchronized. As a result, parts often arrived late, idling partially-built airplanes on Boeing’s assembly lines. In 1997, as Boeing faced unprecedented demand for its aircraft, these problems became unbearable, and the company’s manufacturing ground to a halt. Boeing was forced to shut down two of its major assembly lines and take a $1.6 billion charge against earnings. Boeing has since replaced these systems by an integrated Enterprise Resource Planning (ERP) system based on commercial, off-the-shelf software. With the advent of E-Business and the need to leverage multiple sources of information within the enterprise, ERP software has emerged as a major area of interest for many businesses. Back-office enterprise software has its roots in the 1960s and 1970s, as computing power became affordable enough for companies to automate materials planning through MRP and financial processing through payroll and general ledger software. MRP, short for Material Requirements Planning, was developed in the