ERP Modules
ERP Modules
ERP Modules
com ERP systems are used in all the daily operations of manufacturing. In order to pull data from across the enterprise, ERP systems are made up of many different software modules. Each of the modules in ERP module is specialized to handle specific business processes. In this guide to ERP modules and software, you'll find introductions to the various components of ERP and learn how each module can benefit your organization. Browse all of the sections of this guide, or jump directly to the section that interests you most:
ERP supply chain management ERP customer relationship management ERP product lifecycle management ERP human capital management ERP warehouse management ERP asset management ERP financial management ERP order management ERP project management ERP inventory management
Supply chain management (SCM) is one of the most important software modules for manufacturers. SCM gives provides visibility into the entire supply chain, from start to finish. ERP SCM modules typically include components for forecasting, demand management, procurement and planning; delivery modules such as logistics; and components for after-market issues like returns, installations and contracts. Manufacturers can use customer relationship management (CRM) software to organize and view data on individual customer transactions in one accessible place. ERP CRM modules provide customer data integration, or master data management (MDM), which keeps track of customers across all the sales channels from in-person (field sales) to phone (including telemarketing) to online (teleservice and support). With product lifecycle management (PLM) software, manufacturers can track the design and attributes of a product throughout its lifecycle, from concept to end-of-life. The components that make up ERP PLM modules include product data management (PDM), product design, portfolio management, direct materials sourcing and customer needs management. Human capital management is another one of the common ERP modules. ERP HCM modules function as the core employee record, which details personnel actions, benefits administration and payroll, position management and compliance with government regulations. ERP HCM covers three areas of employee management: transactional, talent management and extended management. Warehouse management systems (WMS) software is a must-have for manufacturers. ERP WMS modules follow the distribution process involved with finished goods or materials from delivery into the warehouse for storage through replenishment and picking for shipment to fulfill orders. WMS modules also help synchronize and control stock on the shop floor. Manufacturers can track physical manufacturing assets involved in production -- the plant itself and equipment -using ERP asset management modules. Some of the daily functions that ERP asset management handles are maintenance schedules, equipment uptime and downtime, inventory and warranty management and compliance with hazardous materials and waste tracking regulations. Financial management is a critical business function for manufacturers. ERP financial management modules include functionality for general ledger, which is the core of ERP financial management. These modules also handle functions for accounts payable and receivable, fixed assets, financial reporting and treasury management. Order management systems take in data from orders on the front end -- such as customer number and product part number -- and make sure that orders get filled on the back end. Manufacturers use ERP order management modules to fill product orders at the lowest possible cost. These modules are equipped to handle functions such as automated order entry, viewing and tracking; order status; canceled transactions; order and credit limit validation and checking for duplicate orders.
With project management software, manufacturers can organize and review the data around project timelines and costs. These software systems are geared toward organizations that bill clients based on the time their employees spend working on individual projects. ERP project management modules handles project definition, project costing and accounting, project portfolio management, resource management and project billing. ERP inventory management modules move finished goods through the production cycle. They are often tied into other functions, including shipping, logistics, orders, billing and, on a broader scale, warehouse management. ERP order management software includes functionality for inventory control, serial number tracking, bar code printing, build materials and kitting, inventory valuation and SKU management. Supply Chain Management ERP SCM systems typically start with creating an order and shipment, putting the transportation together, booking the delivery and beginning the billing cycle. "It's a very straightforward chain of logistics in a sales scenario," said Holger Kisker, an analyst at Forrester Research. "The functionality might include some planning aspects and demand planning. It can track the customer demand and generate a forecast. Based on that [data] you can streamline the supply chain on the delivery side." Typical modules of an ERP supply chain management suite include:
Demand forecasting and planning Supply chain network planning to match demand with the supply side Production planning that reflects the demand Detailed scheduling that directs production for the demand side Event management to collect and analyze distributed data sources Alert monitors for event management Pricing optimization across the lifecycle of a product Supply chain network design and optimization, to evaluate complex supplier networks and determine the most profitable configurations
When evaluating ERP SCM products, software buyers should be aware that different industries have different requirements for ERP and SCM. "Although there are some core modules and requirements, the specifics of which (modules or) products to use can be very different from industry to industry," Kisker said. In retail, for example, demand planning is strongly linked to assortment planning and forecast systems. If you're in charge of moving petroleum products, you'll want your ERP SCM system to have capabilities to analyze specific elements of the tank system or of the types of trucks required. One benefit that companies gain from an ERP SCM deployment is reduced carrying costs for warehouse stock. SCM can also reduce transportation costs by optimizing the balance between supply and demand and by reducing the time between when the product is shipped and payment is received. Warehouse Management ERP warehouse management system (WMS) modules follow the distribution process involved with finished goods or materials from delivery into the warehouse for storage through replenishment and picking for shipment to fulfill orders. "This is where you record actual shipments, keep track of inventory when you ship to fill orders and when you receive new finished goods," said Greg Aimi, a research director at AMR Research who analyzes clients' demand-driven supply networks. Unlike inventory management, which focuses on moving goods or inventory across the complete supply chain, ERP WMS tracks orders that come into the warehouse through the order management system so they are filled accurately and on time. "It's where the manufacturing center has pushed the finished goods out into the distribution environment," Aimi said. "In the warehouse you do receiving, you have dock doors on one side where you're receiving and the goods are put
on the shelves. Then as orders come in from customers, you have mechanisms by which you pick, pack and then ship out of the warehouse." All the functions of the warehouse management system are geared toward performing order fulfillment, on time, with the right product, at the lowest possible cost. The principal focus of the ERP WMS module is inventory accuracy: With a warehouse management system, companies know how much product (of any given SKU) they have at any given time in that facility. Given that inventory accuracy, they can determine how to manage order fulfillment at the most productive means possible. ERP WMS functions typically include:
Picking strategies (according to stock, with rules of priority by expiry, location, etc.) Physical inventory tracking Inventory management and planning for replenishment Stock tracking (arrivals/departures, expiration date, inventories, locations) Synchronization and control of the stock in the shop floor
ERP warehouse management processes provide up-to-date information on inventory so it can be correctly valued. ERP WMS offers return-on-investment (ROI) through manpower savings, space utilization, product turns and customer sales based on efficiency, responsiveness and accuracy. Inventory Management While inventory management can be a standalone application, typically the software is bundled into warehouse management or supply chain management systems. This ERP inventory management module is used by retail, distribution and manufacturing and tied into retail merchandising systems where users also manage pricing. "You need to know what's on the shelves, what's in the warehouse, and how you re-order goods to manage the flow of goods throughout the operation," says Paul Hamerman, vice president of enterprise applications at Forrester Research. The goal is to get the inventory to turn over," Hamerman said. "You're not making any money if it's sitting in the warehouse." The main inventory management functions involve receiving, storing and returning inventory. "You need to account for (inventory) when it's arrived, where you put it, how long it's been there, how it's been returned or how it's been put into a product," said Ray Wang, senior analyst at Altimeter Group. Other key features in ERP inventory management modules are:
Inventory control Build materials and kitting (putting components together as part of a kit for sale) Serial number tracking Bar code printing Valuation features to understand the dollar value of inventory on hand SKU management
The software provides a way to track things that are related to each other. "For a cell phone in a box, the module would tie all the inventory to the cell phone, starting with kitting, which includes build materials, status of kitting components, serial numbers and lot tracing, and extending to un-building the kits and putting things back if you get a recall on a part that needs to be replaced in the kit," said Wang. Another feature of ERP inventory management is the ability to track and manage purchases in order to determine spend levels. When companies are carrying lots of inventory, cash management becomes an important factor. "You need to make sure you're not deploying your capital inappropriately," said Wang.
"If all the batteries you ordered for a kit are missing, your production is delayed, but you don't want too much on hand, because you have to store it, which will also cost you," he said. "You need to know how long this inventory will be in the warehouse and when it will ship."
Customer Relationship Management Simply put, ERP customer relationship management (CRM) software provides clear detail on each individual customer transaction in one accessible place. But ERP CRM systems can do much more. They also provide customer data integration, or master data management (MDM), which keeps track of customers across all the sales channels from in-person (field sales) to phone (including telemarketing) to online (teleservice and support). "Anyone who is dealing with the customer has access to a very detailed track record of everything that has happened with the customer," said Holger Kisker, an analyst at Forrester Research. This record includes data about current product purchases or contract status -- information that can ultimately help increase sales. The data generated from ERP CRM software automatically provides information that lets you track leads and figure out how many of those leads have turned into deals. "Ultimately, you're looking at the effectiveness of your marketing programs to see what channels are more successful, what campaigns are more successful, which ones are moving the needle in terms of sales," said Ray Wang, senior analyst at Altimeter Group. At the core of all ERP CRM is the customer database from which ERP CRM modules generate automated reports and consolidated information. "It's important to be able to slice and dice the reports in various dimensions, per region, per customer segment, per product, and per specific time of the year/seasons," Kisker said. The three key components of a CRM application are sales, marketing and services. Each of those is broken down this way: Sales
Customer demand insights Customer opportunity management Order management (via call center, internet sales, mobile sales) Sales performance management
Marketing
Campaign and promotion management Customer segmentation Lead management Marketing analytics
Services
Customer service management Complaint management Field service management Service management analytics
In addition to individual customer information, CRM systems also provide a detailed view of customer segments.
One way ERP CRM systems can increase sales productivity is by getting the right product to the right customer at the right time, which delivers a higher return, which leads to the key benefits that manufacturers and retails can achieve: higher sales margins. "You can close the sales cycle more efficiently," said Kisker. "Key Performance Indicators (KPIs) can be improved with the right CRM solutions, the number of calls that a call center agent can handle can be improved, and the number of closings per number of average calls, can be improved." Product Life-cycle Management The product development chain or product definition starts with product concept, followed by design, testing, validating and introduction into manufacturing and the supply chain. "As a product gets older, the development cycle extends to decisions about product redesign, cost reduction, or taking it off the market," said Mike Burkett, vice president of AMR Research's Industry Value Chain Strategies team. Core ERP product lifecycle management includes five key components:
Product data management (PDM) is the foundation of PLM. It encompasses the system of records for all documents and information about the product. The main function of PDM is to maintain revision control and make sure that everyone involved -- from design to marketing -- has access to that data. Collaborative product design lets the team share PDM data in a design review meeting where individuals can review the design and discuss what's good or what needs to change. This includes visualization tools for looking at a 3D version of a product or part, and marking it up with comments. Collaborative design also entails working with manufacturing to develop the necessary tools and processes for production. Product portfolio management involves project management activities such as tracking for tracking what projects individuals are working on, how many projects are in the portfolio and the status of those projects. According to Burkett, this feature helps the team decide which projects in the pipeline are the most important. Direct materials sourcing helps users find and organize the materials that are used directly in both development and production processes. This includes approved vendor lists, vendor catalogs and workflow to support the request-for-quote process for approved vendors. Customer needs management displays what customers want and bring that into the development process. This avoids designers' tendencies "to innovate on things that the customers haven't asked for," said Burkett. Customer needs information also comes from feedback from the customer base about installed products.
One benefit of ERP PLM is faster time to market. "If you understand the process better, you can reduce the time it takes to bring a product to market because you can automate the process and offer (greater) access to the same," Burkett said. Human Capital Management ERP HCM software functions as the core employee record, which details personnel actions, benefits administration and payroll, position management and compliance with government regulations. "A company needs to know on a cost level how many employees they have and what it's costing them, along with turnover rates and analytics to help them make decisions and understand the essential talent that makes the organization successful," said Paul Hamerman, vice president of enterprise applications at Forrester Research. Core components of ERP human capital management include modules for three employment management processes: Transactional:
Workforce management, including time capture, forecasting and absence management Human capital management, including employee records, benefits administration, payroll, position management and HR compliance
Talent management:
Performance and compensation, including succession planning and career development Learning management, including training administration and content management Staffing and recruiting, including workforce planning, requisitions, applicant tracking and new hires
Extended management:
Key ERP HCM functions "Personnel management around the employee lifecycle, from hiring to promotions, transfers, and terminations, is the basic employee transaction that any system should be able to manage," Hamerman said. Other key functional areas include compensation, bonuses and long-term executive compensation functions like stock plans, organizational and position structures, and compliance to government regulations around diversity. Some ERP HCM modules will also handle nonemployees, such as contractors, as part of a personnel management component. Beyond standard compensation structures, including salary grades and benefits programs, ERP HCM applications can also be set up to manage eligibility determinations for flexible spending accounts and time off programs. "It's important to develop people in a way that is aligned with the objectives of the business," said Hamerman. "That's the strategic aspect of it, which is of critical importance. Companies that get that tend to be more successful." Asset Management "(Enterprise asset management) goes hand in hand with inventory management, but the difference is that inventory management is about the physical goods that are in the warehouse. Asset management is about the equipment," said Ray Wang, senior analyst at Altimeter Group. Some vendors offer asset management software as a separate application; others make it part of a suite of applications. Some smaller vendors offer standalone applications for capabilities such as assets, inventory and warehouse management. For the purposes of this guide, the term refers to ERP asset management modules that tie into the backbone of an ERP system. Key functions include tracking for:
Maintenance schedules Equipment uptime and downtime Inventory and warranty management Compliance with hazardous materials and waste tracking regulations
By integrating enterprise asset management modules with ERP systems, companies can increase the availability of their production equipment and reduce overall plant costs through better service and maintenance programs. Asset management software can also help a company improve its cash flow by increasing inventory turnover and optimizing manufacturing production. "You need to know if your machinery and equipment are in good working order and if those machines are running at maximum capacity with an uptime of 99.9 percent," Wang said. "If you're collecting revenue throughout the transaction, you need to actively make sure that you fix those machines or keep them in good working order in terms of repair and warranties. It's really critical, especially if you're in the world of production or delivery." ERP asset management can help a company improve its cash flow in other ways. For example, if a company has ten pieces of machinery and can determine how to use eight more effectively, "you've just saved whatever the cost of capital is for two pieces of heavy equipment," said Wang.
"If you can find ways to create more efficient processes in your plants, then you don't have to worry about too much redundancy with maintenance schedules, minimizing downtime and optimizing production schedules." Wang said. That's where asset management delivers." Financial Management General ledger is at the core of any ERP financial management system, which encompasses the functions that are required to maintain one or more sets of books, generate financial reports, manage cash and fixed assets and execute payment and receivable transactions. "Everything starts by having a general ledger and then it works its way out to accounts payables (how you pay vendors) and accounts receivables (how you collect from customers)," said Ray Wang, senior analyst, Altimeter Group. The basic components of a financial management system include:
General ledger, which represents the core set of books for a business entity Accounts payable, which disburses money to vendors Accounts receivable, which processes incoming cash Fixed assets, which inventories capitalized property Financial reporting, which summarizes the results in standard reports such as trial balances and account details
Many ERP financial management systems also include modules such as treasury management, which can include lock box, revenue flow, cash flow, account balances, fund transfers and tax assessments. A cash management module allows you to create an optimal payment/collection schedule. There's also business intelligence (BI) functionality and controls for governance, risk management and compliance (GRC). Project accounting offers a report structure based on hours consumed. According to Forrester Research analyst Holger Kisker, ERP financial management software should include features that support creation of ad hoc reporting as well as month-end closing, quarter closings and year-end reporting. "Since it's tracking every movement in and out of the warehouse, it can deliver at any time clear value of what's in stock," said Kisker. "The financial module (should) follow every individual step, including budget planning for production and billing." ERP finance modules can also help you meet Financial Accounting Standards Board (FASB) standards. Another benefit is systematic automation of data on transactions such as warehouse inventory or the number of days accounts receivables have been aging. "Essentially, it's giving you all the financial data that you need to run a business," said Wang. Order Management On the front end, the system captures data such as customer number, product part number and due date for routing and indexing when an order arrives, no matter whether the order is in the form of a fax, phone call, email, or whether it is paper-based or electronic. Captured data is then transferred to an order management application. In the back office, the manufacturing order management makes sure that the order gets fulfilled -- and at the lowest cost, said Greg Aimi, a research director at AMR Research who analyzes clients' demand-driven supply networks. Key ERP order management functions include:
Automated order entry, viewing and tracking Real-time availability of order status and transaction data Controlled handling for canceled transactions Validating orders and credit limit checking Checking for duplicate orders
Information on all customer order management processes Reports on process time and volume, queued orders, exceptions and delivery dates
In an ERP order management system, all the data is integrated between orders, inventory and an organization's warehouse to make the fulfillment and shipping of orders run smoothly. "Most systems interact with information processes like customer service (prioritizing shipment) or manufacturing (product availability)," Aimi said. "All of these are outside of the execution of these systems, but it's good information to have for a holistic approach." The key benefit of an ERP manufacturing order management system is faster order fulfillment and more effective sales administration. It can help increase data entry accuracy and improve cash flow, reduce order errors and fulfillment delays, and improve customer satisfaction. Reporting and analysis features balance workloads and identify process bottlenecks. Many ERP order management systems offer automatic confirmation sent directly to the customer once the entry is created in the ERP system. This additional tracking of all incoming documents from creation in the ERP to fulfillment adds another layer of process monitoring and control. ERP project management systems are geared toward organizations, such as engineering firms, construction firms, consultants and architects, that bill clients based on the time their employees spend working on individual projects. Project management modules deliver process automation and process improvement that transcends the traditional boundaries of customer resource management (CRM) and supply chain management (SCM) software to include project accounting, change management, time and expense reporting and analytics about accomplished work. The core components of ERP project management software include:
Project definition, which includes tasks and delivery dates and finding resources to fulfill the project Project costing and accounting, which looks at direct costs, materials, labor, travel and other costs associated with the project Project portfolio management, which provides visibility over multiple projects to see if projects are running on time and on budget Resource management, which is the human resources (HR) component and provides visibility into resources available for multiple projects Billing for projects per hour, including profitability tracking
ERP project management software gives managers insight into a project across the entire project lifecycle, from developing and selling the business or service, delivering that service, managing and operating the business to billing and collecting payment once the project is complete. The software gives these managers the data they need to assess and analyze project performance and profitability. "Billable hours are the inventory of a project-based firm, so higher resource utilization and (better) management of project costs are key to remaining profitable," said Paul Hamerman, vice president of enterprise applications at Forrester Research. Hamerman said that ERP project management modules help companies optimize the resources they have and assign those resources to projects that will maximize the utilization of those resources. ERP project management modules are also used to prevent projects from going over budget or running over schedule.
What other resources would you like to see on ERP supply chain management? Email us at editor@searchmanufacturingerp.com. About the author: Catherine LaCroix is a freelance writer based in Portland, Ore. She covers technology used in business, education and healthcare.