What is ERP (Part one)
Updated: Jan 22, 2020
With an ERP (Enterprise Resource Planning) system like SAP Business One, all of a business’s core functions like Accounting and Finance, Reporting, Purchasing and Operations, Inventory and Distribution, Sales and Customer Relationship Management, and Human Resource Management, are completely integrated into one system in the form of modules that dynamically interact with each other.
Still confused? Let’s take a look at a basic, practical example of how an Electronics Retail Business uses SAP Business One. It should be noted, however, that this just an example of a certain industry; SAP Business One can be tailored to fit any industry your business is in, whether it is manufacturing, wholesale, financial services, media, or even shipping.
On the first Monday of the month at 08:00 AM, the owner of the Electronics Retail Business runs one of many reports in SAP Business One to see which inventory items have not been sold since last month, so that he could assign his sales employee those items to sell by the end of the working week. When the sales employee comes in at 09:00 AM, she sees that she has been assigned to sell at least 3 out of the 5 Washing Machines, on top of her regular duties, by the end of the week.
The sales employee very smartly decides to take advantage of the Customer Relationship Management (CRM) function in SAP Business One. Using the Campaign Generation Wizard in the CRM function, she creates a target group who she believes will purchase the Washing Machines and within a few minutes, she mass e-mails them.
The next day she gets a reply from 4 companies showing interest in the product, turning them into Leads. They request for Quotations, which she creates and sends right away through SAP Business One. Once the Quotations got approved and the companies place their purchase orders, the Leads transition into Customers.
SAP Business One’s live inventory management capability is based on one main formula: Available Quantity = In Stock – Committed + Ordered. When she then creates the Sales Orders by simply copying in the Sales Quotations, an automatic inventory update occurs; 5 Washing Machines are in the ‘In Stock’ Quantity, 4 Washing Machines are in the ‘Committed’ Quantity, and 1 Washing Machine in the ‘Available’ Quantity. When the items are delivered, a Delivery document is created by copying in the Sales Order, updating the Washing Machine inventory to show that 1 is available, 1 is in stock and 0 are committed. Thereafter, an A/R Invoice is created by copying in the Delivery document, and the incoming payment is received based on the agreed date.
Stay tuned for part two, continuing with the procurement process in SAP Business One.