What is ERP II? Features, Framework, Best Practices

What is ERP II?

ERP II (Enterprise Resource Planning II) is an extension of traditional ERP software that expands beyond the internal operations of an organization and includes the integration of external partners, suppliers, and customers into a single system.

Initially, ERP systems were designed to bring in automation across multiple business units simultaneously, and ease out the flow of the manufacturing process. It helped organisations to make timely delivery of products, improve product quality and maintain an adequate level of inventory, thereby increasing their competitive strength.

However, ERP systems failed to address other critical functional areas of a business, such as sales, marketing and client servicing as they were focused mainly on the manufacturing and supply side of a business. In some cases, existing ERP systems proved inefficient in providing organisations an edge over its competitors.

For instance, the ERM system lacked synchronisation with the Internet and thus, it could not use websites, customer service forums or online order filling portal. Therefore, it required efficient Customer Relationship Management (CRM) capabilities.

In addition, ERP required an appropriate system to manage and catalogue critical documents, such as purchase orders, order receipt or business contracts. In view of this, ERP manufacturers developed an extended form of ERP, called ERP II.

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ERP II Definition

Gartener Inc. has defined ERP II as a business strategy and a set of industry-domain-specific applications that is used to build customer and shareholder value by enabling and optimising enterprise, collaborative operational and financial processes.

ERP II is regarded as the next generation of ERP. ERP II is a more Web-friendly, flexible application that provides quick access to business information to different stakeholders of an organisation from any location.

It provides several security tools that prevent the misuse of critical business information. The system includes many comprehensive features to serve the requirements of different industries.

Applications of ERP II move towards a borderless enterprise by extending the corporate supply chain in a marketplace. ERP II integrates back-office functions with front-office functions (such as customer interaction) and addresses e-enabled business functions, such as e-commerce, e-finance, e-governance, etc.

Table below illustrates the evolution of ERP II from ERP along with the functionalities that have been incorporated in the existing system:

ERP(1990-1999)	• Accounting • Shop Floor Control • Material Planning • Order Entry • Distribution
Extended ERP (2000-2005)	• Warehousing • Procurement & Logistics • E-commerce • Scheduling & Forecasting • Capacity Planning
ERP II (2005 Onwards)	• Customer Relationship Management • Knowledge Management • Project Management • Workflow Management • Internet & www Integration • Portal Capability • Integrated Financials

ERP II integrates all critical functions of an organisation. It integrates all traditional functions performed by ERP, such as planning, accounting, order entry and distribution with other advanced functions like CRM, knowledge management, project management, human resource management and workflow management.

ERP II strengthens the existing ERP system by providing instant information to different business entities or departments of an organisation as and when needed.

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Features of ERP II

In the year 2000, Garter Group coined the term ERP II and also published an article, “ERP is Dead—Long Live ERP II”, in their group publication, Gartner Publication. ERP II is defined as an Internet-based software solution, which enables employees, suppliers and customers to have real-time access to enterprise-wide ERP systems. ERP II performs many important functions.

• Provides an open independent application architecture
  
  
• Extends business processes
  
  
• Facilitates individual business function-based characteristics
  
  
• Provides support to enterprise processing requirements
  
  
• Performs the role of an application as well as a deployment strategy

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Characteristics of ERP II

The characteristics of ERP II can be further summarised as follows:

• Integrates an organisation’s critical operational, financial and collaborative processes (both internal and external).
  
  
• Facilitates the entire corporate information required by business partners, suppliers, customers, etc.
  
  
• Offers better efficiency and operational speed by integrating ERP along with CRM, SCM and Business Intelligence (BI) techniques and the Internet.
  
  
• Removes information barriers from departments and ensures an efficient and transparent information flow.
  
  
• Facilitates collaboration among different enterprises by controlling information in resources.
  
  
• Links with other ERP systems external to an organisation.
  
  
• Performs an important role in decision-making and process standardisation and ensures transparency across an organisation.
  
  
• Integrates internal and external business processes by eliminating a single vendor strategy.
  
  
• Connects an organisation with its key stakeholders including investors, business partners, employees, suppliers and customers directly or indirectly by using the Internet and Web services.

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Framework of ERP II

In order to meet emerging business requirements and technological advancements, the majority of vendors, either partially or completely, adopted ERP II. Figure 12.2 shows the framework of ERP II:

Let us discuss the generic components of the conceptual framework of ERP II in detail. It comprises four layers, which are depicted in Table below:

Layers	Components	Generic Components
Foundation	Core	Application Framework (AF) Integrated Database (ID)
Process	Central	Enterprise Resource Planning (ERP) Business Process Management (BPM)
Analytical	Corporate	Supply Chain Management (SCM) Customer Relationship Management (CRM) Supplier Relationship Management (SRM) Product Lifecycle Management (PLM) Employee Lifecycle Management (ELM) Corporate Performance Management (CPM)
E-business	Collaborative	Business-to-Consumer (B2C) Business-to-Business (B2B) Business-to-Employee (B2E) Enterprise Application Integration (EAI)

Each layer of this framework is described as follows:

Foundation layer

This layer forms the basic architecture of ERP II and comprises the core components. Integrated database and application framework are the two core elements that form the foundation layer. This integrated database is usually distributed.

Process layer

This layer depicts the transaction-based system and is considered the central component of ERP II. This system is Web-based not Web-enabled. Therefore, it has the capability of providing distributed Web services. The central component of ERP II conceptual framework is ERP.

This is owing to the fact that the traditional ERP functionalities, such as accounts, sales, manufacturing, human resources and logistics are critical to any business and when combined with other modules, such as CRM, SCM, project management and quality management, build the enterprise-wide ERP system.

Analytical layer

This layer enhances and extends the functions of the process layer. The analytical layer includes corporate components and offers decision-making support to the management and the entire organisation. The components of the analytical layer are as follows:

• Supply Chain Management (SCM): It takes care of the logistics, procurement and delivery functions of a business and provides support to planning and production functions.
  
  
• Customer Relationship Management (CRM): It takes care of transactional as well as non-transactional relations with customers, which start with the customer identification process and end with client servicing management.
  
  
• Supplier Relationship Management (SRM): It takes care of effective management of relationships with suppliers and hence the management of the supplier base.
  
  
• Product Lifecycle Management (PLM): It is about the improvement of the innovation process so that organisations can introduce innovative and profitable products in the market.
  
  
• Employee Lifecycle Management (ELM): It takes care of the entire information related to an employee, starting from entry to exit from an organisation. It enables the organisation to record the competencies of its employees.
  
  
• Corporate Performance Management (CPM): It includes an organisation’s processes and procedures that help to monitor and manage the overall performance of an organisation.

E-business layer

This layer takes care of the integration of ERP II with external factors and its communication with them. The e-business layer comprises collaborative components serving as a portal of ERP II. The components of e-business layer are given as follows:

• Business to Consumer (B2C): It refers to the e-commerce transactions of enterprises with individual customers by using the Internet.
  
  
• Business-to-Business (B2B): It refers to the e-procurement functions of an organisation, which involve automation and decentralisation of enterprise procurement process.
  
  
• Business-to-Employee (B2E): It denotes the intranet platform including updated and personalised employee data of an organisation provided to employees.
  
  
• Enterprise Application Integration (EAI): It refers to the extranet portal integrated with other ERP systems, which are internal as well as external to an organisation.

The successful implementation of ERP II ensures the integration of best practices within an organisation. Some of the best practices of ERP II are discussed in the next subsections.

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Best Practices of ERP II

ERP II will not yield the intended benefits to organisations if it does not implement the best practices. Some of the best practices of ERP II are as follows:

Selecting multiple vendors

ERP II can offer best services to an organisation if it avails the service of more than one vendor. This is because ERP II is able to handle multiple tasks. Every ERP vendor possesses certain specialisation and competitive advantage over others; for instance, one vendor may have specialisation in a specific industry, whereas another might specialise in a particular business function.

Utilising the core strength

ERP II is established to meet the deficiencies of ERP. ERP II aims to address additional areas where traditional ERP has failed. It explores the additional functions, such as CRM and SCM, which can reap real benefits for organisations.

Redefining business processes

ERP II enables an organisation to restructure its business processes so that the tasks that could not be carried out with ERP can be performed easily. In the case of ERP, the organisation has two possibilities, one of modifying its business and another of altering the ERP system. While in the case of ERP II, it is wise to modify only the business and restructure business processes as it has the advancement of core strength that can make any organisation efficient and profitable.

Evaluating performance periodically

It is necessary to monitor the performance of ERP II. This periodic assessment of ERP II provides an organisation an overall idea of the working of ERP II. Hence, it reduces the chances of errors. The outcome of such periodic evaluation can be used as guidelines to be implemented in ERP II to improve it further.