ERP systems were developed based on generic need of various types of organizations, belonging to diverse business segments and further evolved through continuous adding up of new business processes. Consequently, any ERP system now offers numerous functionalities, which overwhelm most of the enterprises, during project implementation. Enterprises are needed to pickup relevant components of the system and set up and align these components to meet their specific business requirement.

What is configuration?

Configuration of an ERP system deals with handling of numerous usage controls, which can be switched off or switched on, so as to balance its functionalities to extant needs. First thing to happen is to install specific modules needed and configuring these modules, as per the scope of the project. Thousands of configuration tables are present, which define how the system should operate, how the data entry screen will look like, how the signals and massages will appear etc.

The above process is extremely complex, particularly for tier 1 vendors like SAP and Oracle. To alleviate this complexity, ERP vendors are creating pre configured modules suitable for a particular business vertical. ERP vendors are also developing automated pre configuration tools such as Orgware from BaaN. SAP has also brought out “Accelerated SAP Solution” containing industry specific templates which can be tweaked for an individual company.

General Mode of Configuration:

1. A function can be turned on or turned off or made optional.
2. XOR i.e.to chooses only one flow that fulfills the specified condition.
3. OR where a configuration supports optional activities or flow requiring all, none or some of the activities.
4. AND - indicate mandatory parallel flows.

Some configuration choices are irreversible e.g. if “negative inventory allowed” option is chosen, it can not be reversed at a latter stage. Some configurations are reversible e.g. purchase order quantity may exceed blanket order quantity or not. In some case if a specific choice is not made, configurable function can be switched on or off by default.

Setting up of basic system: Some important activities related to setting up of base system, having impact on all modules, are given below:

1. Creation of a company: This is basically to create a data base. A number of data bases can be created of which one may be for actual transactions where as the others may be for used for testing and training. A Company may different hierarchies such as single logistics/single finance, multi logistics /single finance, multi logistics/multi finance etc.

2. Setting up of currency: Currencies need to be configured as i) base currency which is the legal currency of the country where the organization is operating ii) Alternate reporting currencies, iii) transaction currencies used for transaction with vendors and customers who may be spread over a number of countries.

3. Setting up of calendar and periods: Calendars are used to record information on the availability of resources. Periods are time intervals that can be utilized for statistical, financial, planning and cost control purpose.

4. Units of Measure: Base units of length, surface area, weight, time and their conversation factors for transactional purpose.

5. Integration between finance and logistic: Setting up of inter company relations, mode of updating finance tables either in real time or in batch mode, mode of inventory valuation such as LIFO, FIFO, Standard Costing or Weighted Average, treatment of finalized and non finalized transactions on financial ledger etc.

6. Defining number group, series type and series length: To be used as ID of a unique transaction like purchase orders, sales order, production order etc.

7. Defining Countries: Customers and vendors are located in various countries for which country code need to be defined. This is very important due to necessity of tax calculation and reporting.

8. Assigning Tax codes: Needed to be defined for sales, purchase, service, project transactions.

Conclusion

Even if a pre-configured package for a specific vertical is chosen, the base configurations as mentioned above is needed to be done with extreme care, during implementation. This base configuration affects all the modules which form part of the implementation.