ERP - Enterprise Resource Planning - Week 1

I came across something so old that it dates back to the pre-internet period. In fact, I believe this has been around since there was the first business was opened by someone. I am talking about ERP systems. 

When people like me, who are unknown of this term and the business world, think about ERP we probably think about something super big software or tool that is somehow managing all the business at once. From what I have learned today, it is true to an extent. I believe there is so much more and so less to it.

Yeah, I understand that it seems rather weird that I said "it is so much more and so much less" at the same time. Understand my POV though, I know nothing about it except that it manages resources, money, and information of small-scale businesses as well as some really large businesses. So the system would probably be a simple system that somehow manages all the complications of a big business. 

Maybe for someone who probably already knows about ERP systems, I might sound completely crazy but I think it is true that an ERP system is a simple yet sophisticated system that can handle the smallest of business activities and the most complex of processes with the utmost sophistication. No wonder big companies pay crores of rupees and invest years to install ERP systems.

My goal with these posts and for the next few weeks is to try and build a simple ERP system myself. Is it possible? Who knows, there is only one way to find out. If so many people and so many companies have already built an ERP system, how hard can it possibly be? Not like I am building something pioneering.

So, here is what I have understood about ERP so far. My current understanding of ERP can turn out to be very wrong but who's here to judge me?

Alright, let's get started.

An ERP is a system that optimizes the flow of information, materials, and cash in an organization. oh, ERP is Enterprise Resource Planning System by the way. As you might guess from the abbreviation and the definition the ERP system is a model of any business so we can say that a study of ERP is a study of Business. 

Whatever I have learned about this is so far based on this video course that I have just watched the 1st video of. Here is the link,

I liked that they introduced ERP with simple business processes. This made me want to build it myself. I think I should mention again here that, while I just thought about what I am planning to make, it does feel daunting of a task and borderline impossible. But I have a plan, I plan to take things one step at a time.

While I was watching the video, I learned that there are 2 important processes in a business. 

The OTC and PTP. Let's talk about it briefly and then I can drop in a screenshot of the video that will make it very easy to understand. 

OTC is Order to Cash. As you might have guessed from the name, Order to Cash is a customer-facing process. When we get an Order from the customer, then there are a few steps and we get paid. 

PTP is Procure to Pay. This is sort of a mirror image of the OTC where we go from procurement of material to Payment for the same. 

The good thing is that the video, just like my approach to this, is taking things step by step. So after explaining the OTC and PTP briefly the instructor then talks about how these 2 processes are linked together. That is through Inventory and a General Ledger. 

The inventory as you understand is physically stored stuff. It can either be Materials that are procured or items being sold to the final customer. General Ledger is everything about money. It is used to document everything money-related. From Costs to Revenues and Profit and Loss statements to Balance Sheets everything is a part of General Ledger. So far whatever I have understood about General Ledger it is probably too big to even start understanding right now. Considering my Engineering background and no Commerce, I think it is best I get to it the last and have some of my friends explain it to me later. 

Great! So far, we have understood a lot of things. I know, it is an overview of everything, and to be honest, that is all I know about it too. So let's take it one step at a time and work on how we can build this. 

Oh, I forgot to mention the 2 important blocks in the system. The Accounts Receivables and Accounts Payable. Both of these are agian, mirror processes, the first facing the customer and the other facing the suppliers. Collection of Money from customers and payment of money to the suppliers is what these 2 departments do. 

I want to say once again, all that I know about ERP systems is limited to just the 15 mins video that I have seen and so if you find that I am not realizing the importance or the depth of any specific part of the process then you are right. But, I am not taking anything lightly. If the ERP system really does work as a Backbone of so many huge multi-crore rupees businesses then I know that every single part of the system is crucial and needs to be addressed with the seriousness it deserves. 

I will do that when the time comes for it. Right now, my only goal is not to let myself freak out and stop building this ERP system as I have done with so many other things in my life. Hence the non-serious tone towards this mammoth of a system.

So far, whatever we have discussed is very specific to a distribution business. Where there is no manufacturing involved. I want to keep it that way for now so it is easier to understand and build on.

Here is the screenshot for your reference.

So, the last thing I want to talk about is what is Step 1 in my process of doing this. I think it is to learn about how big databases work and how they are built and managed. I can see clearly how structured this data is going to be and how many different tables will have to be linked together to build this complex system. No matter how simple I decide to start, it is still going to have multiple tables and joins, and triggers from one step to another. I think that is going to be my first step and task for this week. 

Learn, SQL Database administration and build a Simple SQL database myself to start building the OTC module.