Process automation necessarily means integration with Enterprise Resource Planning because ERP is the core business system for most mid-sized companies. ERP takes on this central role by joining multiple, formerly separate, business applications through a common database and a consistent user interface. ERP encompasses financial accounting (General Ledger, Accounts Payable, Accounts Receivable, Fixed Assets, etc.), and other “back office” processes such as order entry, procurement, receiving, inventory, warehousing, manufacturing, shipping, and invoicing.
Demands for uniformity of information, ease of data access, and simplified work flow across departments—the “enterprise” part—have driven the widespread adoption of ERP. While capable of achieving these goals, ERP systems don’t come pre-loaded with a company’s records and they don’t operate themselves. Somehow data must be entered, managed, and connected to processes both internally and externally to the company. The quality of those inbound and outbound data touch points turns out to be a critical success factor for ERP.
Paper documents such as printed orders, pick lists, receiving sheets, and inventory counts are still widely used as internal data handling mechanisms. Information sent between customers or third-party logistics providers—even when communicated electronically—may be printed, copied and handled one or more times. Each time paper is used as the communication medium, data must be keyed manually into the ERP system. Paper-centric systems can work well, but have inherent problems:
- Speed (or rather, lack of it)
- Accuracy – keyboards invite mistakes
- High labor cost
- Document legibility and fragility
For ERP systems to provide their utmost value, electronic integration of data streams must be put in place. Removing printers, copiers, faxes and keyboards is arguably the most important process improvement priority for mid-sized suppliers. Unfortunately, little about ERP systems is standard – some are plug-and-play with internal or external data and some aren’t. Special care must be taken when selecting catalog, ecommerce, EDI, payroll, warehouse, automatic data collection, or other systems to make sure they are compatible with your particular ERP system. Especially going forward, interfaces must be maintained when upgrades or version changes happen.
Integration Means Hands Off
Let’s take Electronic Data Interchange (EDI) as an example. A supplier can log onto a trading partner’s website, conduct transactions using webforms, and then re-key them into ERP. For small volumes this is manageable, but the limitations of processes set in quickly as traffic rises.
A fully integrated ERP-EDI connection enables suppliers to complete the entire cycle from receipt and review of orders to fulfillment, invoicing, and receipt of payment without any manual re-keying. Full integration means that the EDI solution plugs into ERP without customization on the ERP side. On the external-facing side, the EDI connection requires adapters called “maps” that make unique trading partner relationships conform to the desired one-to-many process—where the same ERP actions happen regardless of who is at the other end.
Subsequent blog posts will highlight how specific steps within the order-to-cash cycle must be integrated to maximize performance. We’ll use EDI-ERP integration among internal and external nodes to illustrate how different levels of automation are available to achieve desired cost reductions and trade compliance improvements. True integration with ERP will always be at the core.
By RedTail Solutions, provider of Cloud-Delivered Managed EDI Services