If you go to Sourceforge.net, a website that provides an open source project development platform,and browse to the ERP category, you will find no less than 402 results! That’s quite an amazing number, but if you try to dig in a little bit around that category,you will notice that many projects are actually only CRM (Customer Relationship Management),SCM (Supply Chain Management), accounting or HR applications. They do not fully support the functionality required from a real ERP solutions.
So how would you define an ERP system? My post An Introduction to ERP – Enterprise Resource Planning is a good starting point. If you are interested in implementing ERP in your organization, or are a consultant who is looking into open source ERP solutions,you must make sure the solutions you are considering does support all required businesses processes.
There are tens of millions of businesses world wide,each with its own way of conducting business.The real challenge facing open source ERP software developers is to try to develope enough functionality that will cover as many business processes as possible.
Despite the variance in business processes, all commercial organizations have several core business process.An ERP solution must support these process. A software project that does not support there core processes is not a real ERP solution.CRM is not ERP,HR systems are not ERP.
The 3 Core Processes that open source ERP must support out of the box are:
1.Order-To-Cash – The blood flowing through every commercial entity is customers orders. All businesses are exist to make money from selling products (or a service,which can be considered as a type of product in our context). Like other core processes,Order-To-Cash can be broken down into sub-processes – creating a customer and product master records, opening a customer order, allocating stock to that order,picking and shipping,invoicing and finally (hopefully) getting paid. When you go to your local grocery store, the entire Order-To-Cash process can take about 30 seconds from start till end. If you would have ordered an airplane, it might take 10 years until the order was completed.
2.Procure-To-Pay – Unless you found a way to produce products from thin air, you would probably have to get the products you sell from a supplier. There are two types of suppliers – one is external – a vendor, the other one is internal – your production plant. The Procure-To-Pay process refers to the first type. It usually starts with a purchase requisite from one of the departments in your organizations (for smaller companies that step is often omitted), which is converted,after some price and terms negotiation with your vendor, to a purchase order which is sent to your vendor. The vendor,usually upon receiving your order will ship you the ordered products (not necessarily all the products you ordered are shipped to you as it depends on the products’ availability) together with an invoice. The invoice will be paid by your accounting team, and the process will be completed.
3.Make-To-Stock – The other way you might get products to sell to your customers is by producing them. Many companies constantly consider weather they should purchase products from vendors or manufacture them internally. An open source ERP system should support both processes as stand-alone process but should also be able to integrate them. Even if a company is manufacturing all the products it is selling, it will still need to procure raw materials,sub-parts or accessories associated with their products. The Make-To-Stock process will start with purchasing or producing internally the raw materials or components of the finished product,followed by some processing along a route – different processing activities in different work centers,following a pre – determined order,followed by inspection,packaging of the finished goods and either stocking of the finished goods or sending it directly to a customer to fulfill a specific customer order (in that case,the process is often called Make-To-Order).
These 3 core business processes can be broken down further to more granular sub-processes. Also, not all 3 processes are part every companies business activities – banks,for example, do not procure or manufacture their products. Just remember that subject of this article – business processes open source ERP systems must support. If a software package does not support these 3 core businesses,it is not ERP.