Introduction to Enterprise Resource Planning (ERP) systems and open source solutions

Background: What is ERP, what does it offer and why do I need in my company?

Imagine you are running a small company manufacturing a batch of components for the textile industry. How many activities do you imagine you would need to perform to run that company effectively? At a minimum, you would need to handle at least ten daily activities to maintain your enterprise, not to mention strategise for growth and innovation. These activities typically include:

• Sales
• Accounting
• Finance
• Procurement
• Manufacturing
• Inventory management
• Human resources
• Distribution
• Customer support
• Facilities management

Now these tasks can be managed by you, the owner, or by your employees, and even in a lean organisation, you would likely need at least 3-5 people performing these activities. Now imagine your organisation is growing with high demand for your textile products. Those 5 people you have hired are not only performing their primary jobs, such as sales or production scheduling but also managing multiple excel files, pdf and other documents to communicate between teams. This leads to increased costs, reduced efficiencies, and negative impact on overall customer satisfaction.

What your organisation is missing a system to share data across teams. This is what Enterprise Resource Planning (ERP) is all about, it's a method for running your business efficiently.

ERP integrates various business departments to ensure smooth operations and effective management of supply and demand. Originating from Material Resource Planning (MRP) systems developed in the 1960s for manufacturing operations, ERP systems have evolved to support a wide range of industries. The ERP software systems of today are evolution of MRP systems but today they are not just used within manufacturing sector but whole range of industries.

The ERP system connect different departments within an organisation, providing a unified approach to:

• Demand Management: Scheduling production to reduce inventory costs and improve supply chain efficiency.
• Resource Planning: Determining what to produce, how to produce it, and how much to order from suppliers.
• Financial Management: Managing invoices, payments, and overall financial operations.

At the heart of any ERP system is Master Data which serves as a single source of truth, reducing the errors associated with manual systems( excel files for example) and enhancing decision-making and visibility across the organisation. Employees could focus on value added activities within an organisation and leave ERP system to manage the tasks. This master data ensures organisation is not creating variation in inventory levels, duplicating customer demand and while enabling data analytics to predict trends. This sounds great but what's the catch?

Challenge: How much is it again?

The cost for implementing leading ERP software system would be huge for any company, never mind small companies like yourself who need it the most to grow and scale their operations within competitive textile industry. The cost of popular ERP solutions can range from hundreds of thousands to millions of pounds, making it a significant investment.

This high cost highlights the need for open-source solutions, which could reduce the cost of implementing ERP systems while enabling wider integration at a lower cost compared to a traditional systems. Imagine being able to run what-if scenarios for production schedules using SimPy or tools like NetworkX to improve your supply chain management.

Open Source ERP systems

Open-source ERP systems provide a cost-effective alternative to traditional ERP solutions. They offer the flexibility to customize and integrate without the high costs associated with proprietary systems. Here are a couple of popular open-source ERP options:

1. ERPNext
   • Overview: ERPNext is an open-source ERP solution that covers a wide range of business processes, including accounting, inventory, sales, purchasing, manufacturing, and more.
   • Features: ERPNext offers modules for various business functions, making it suitable for a wide range of industries. It is highly customisable and built on Frappe Framework to enable anyone to get involved from low-code to customised app built on python.
2. Odoo
   • Overview: Odoo is another powerful open-source ERP that offers a suite of business applications, including CRM, e-commerce, billing, accounting, manufacturing, inventory management and more.
   • Features: Odoo is known for its modular approach, allowing businesses to start with a few modules and add more as needed. It offers a user-friendly interface and strong community support.

Both ERPNext and Odoo are written in Python, making them ideal for testing within the openmanufacturing.dev community and exploring integration with other open-source manufacturing software solutions.

In my next article, I will guide you through the installation of ERPNext and show you how to get it up and running on your local device. Stay tuned!